There are two things that stand out. The Indian economy began to revive in March 2013 more than a year before the current government took office after a period of contraction following the Global Financial Crisis.
But, more importantly, since the third quarter of 2016-17 (October to December), this recovery has transformed into a secular slowing of growth. While the RBI did not declare so, many experts believe the government’s move to demonetise 86 percent of India’s currency overnight on November 8, 2016, was the catalyst that sent the country’s GDP into a tailspin.
The GDP growth rate steadily fell from over 8% in FY17 to around 4% in FY20, just before Covid-19 hit the country, as the ripples of demonetisation and a poorly designed and hastily implemented Goods and Services Tax (GST) spread through an economy already struggling with massive bad loans in the banking system.
PM Modi voiced hope in January 2020, when GDP growth fell to a 42-year low (in terms of nominal GDP), saying: “The Indian economy’s high absorbent capacity demonstrates the strength of the country’s foundations and its ability to recover.”
The foundations of the Indian economy were already weak in January last year well before the outbreak as an examination of key factors shows. For example, in the recent past (Chart 2), India’s GDP growth trend mirrored an exponential development pattern “Even before Covid-19 came the market, there was a “inverted V.”
Is India’s GDP expansion negative?
India’s economy grew at its slowest pace in over four decades in 2020-21, with a negative growth rate of 7.3 percent and a meager 1.6 percent in the fourth quarter of the fiscal year. The GDP figures released by the National Statistical Office (NSO) on Monday reflect the fragile state of the country’s economy, which is all the more apparent given that the Centre started the ‘Unlock’ process in July 2020 after imposing a nationwide lockdown in March 2020 that lasted until June 2020.
The fourth quarter results are particularly bad since, while all sectors were fully open and the situation was close to normal in January-March, a 1.6 percent growth in the fourth quarter of FY21 indicates that everything is not well with the nation’s fiscal health.
“Real GDP, or Gross Domestic Product (GDP) at Constant (2011-12) Prices, is now expected to reach Rs 135.13 lakh crore in 2020-21, down from Rs 145.69 lakh crore in the First Revised Estimate of GDP for the year 2019-20, announced on January 29th 2021. GDP growth in 2020-21 is expected to be -7.3 percent, down from 4.0 percent in 2019-20 “According to a press statement from the Ministry of Statistics and Programme Implementation.
The GDP grew at a dismal 4% in 2019-20, an 11-year low, owing primarily to shrinkage in secondary industries like as manufacturing and construction.
India’s GDP shrank by 24.38 percent in the first quarter of 2020-21, owing primarily to the Covid-19 epidemic.
What causes the economy to contract?
Even a small drop in GDP can have an influence on client purchasing power and spending patterns, affecting your organization. Shifts in demand, rising interest rates, government expenditure cuts, and other factors can cause a country’s real GDP to fall.
In 2021, what would India’s GDP be?
In its second advance estimates of national accounts released on Monday, the National Statistical Office (NSO) forecasted the country’s growth for 2021-22 at 8.9%, slightly lower than the 9.2% estimated in its first advance estimates released in January.
Furthermore, the National Statistics Office (NSO) reduced its estimates of GDP contraction for the coronavirus pandemic-affected last fiscal year (2020-21) to 6.6 percent. The previous projection was for a 7.3% decrease.
In April-June 2020, the Indian economy contracted 23.8 percent, and in July-September 2020, it contracted 6.6 percent.
“While an adverse base was expected to flatten growth in Q3 FY2022, the NSO’s initial estimates are far below our expectations (6.2 percent for GDP), with a marginal increase in manufacturing and a contraction in construction that is surprising given the heavy rains in the southern states,” said Aditi Nayar, Chief Economist at ICRA.
“GDP at constant (2011-12) prices is estimated at Rs 38.22 trillion in Q3 of 2021-22, up from Rs 36.26 trillion in Q3 of 2020-21, indicating an increase of 5.4 percent,” according to an official release.
According to the announcement, real GDP (GDP) or Gross Domestic Product (GDP) at constant (2011-12) prices is expected to reach Rs 147.72 trillion in 2021-22, up from Rs 135.58 trillion in the first updated estimate announced on January 31, 2022.
GDP growth is expected to be 8.9% in 2021-22, compared to a decline of 6.6 percent in 2020-21.
In terms of value, GDP in October-December 2021-22 was Rs 38,22,159 crore, up from Rs 36,22,220 crore in the same period of 2020-21.
According to NSO data, the manufacturing sector’s Gross Value Added (GVA) growth remained nearly steady at 0.2 percent in the third quarter of 2021-22, compared to 8.4 percent a year ago.
GVA growth in the farm sector was weak in the third quarter, at 2.6 percent, compared to 4.1 percent a year before.
GVA in the construction sector decreased by 2.8%, compared to 6.6% rise a year ago.
The electricity, gas, water supply, and other utility services segment grew by 3.7 percent in the third quarter of current fiscal year, compared to 1.5 percent growth the previous year.
Similarly, trade, hotel, transportation, communication, and broadcasting services expanded by 6.1 percent, compared to a decline of 10.1 percent a year ago.
In Q3 FY22, financial, real estate, and professional services growth was 4.6 percent, compared to 10.3 percent in Q3 FY21.
During the quarter under examination, public administration, defense, and other services expanded by 16.8%, compared to a decrease of 2.9 percent a year earlier.
Meanwhile, China’s economy grew by 4% between October and December of 2021.
“India’s GDP growth for Q3FY22 was a touch lower than our forecast of 5.7 percent, as the manufacturing sector grew slowly and the construction industry experienced unanticipated de-growth.” We have, however, decisively emerged from the pandemic recession, with all sectors of the economy showing signs of recovery.
“Going ahead, unlock trade will help growth in Q4FY22, as most governments have eliminated pandemic-related limitations, but weak rural demand and geopolitical shock from the Russia-Ukraine conflict may impair global growth and supply chains.” The impending pass-through of higher oil and gas costs could affect domestic demand mood, according to Elara Capital economist Garima Kapoor.
“Strong growth in the services sector and a pick-up in private final consumption expenditure drove India’s real GDP growth to 5.4 percent in Q3.” While agriculture’s growth slowed in Q3, the construction sector’s growth became negative.
“On the plus side, actual expenditure levels in both the private and public sectors are greater than they were before the pandemic.
“Given the encouraging trends in government revenues and spending until January 2022, as well as the upward revision in the nominal GDP growth rate for FY22, the fiscal deficit to GDP ratio for FY22 may come out better than what the (federal) budget projected,” said Rupa Rege Nitsure, group chief economist, L&T Financial Holdings.
“The growth number is pretty disappointing,” Sujan Hajra, chief economist of Mumbai-based Anand Rathi Securities, said, citing weaker rural consumer demand and investments as reasons.
After crude prices soared beyond $100 a barrel, India, which imports virtually all of its oil, might face a wider trade imbalance, a weaker rupee, and greater inflation, with a knock to GDP considered as the main concern.
“We believe the fiscal and monetary policy accommodation will remain, given the geopolitical volatility and crude oil prices,” Hajra added.
According to Nomura, a 10% increase in oil prices would shave 0.2 percentage points off India’s GDP growth while adding 0.3 to 0.4 percentage points to retail inflation.
Widening sanctions against Russia are likely to have a ripple impact on India, according to Sakshi Gupta, senior economist at HDFC Bank.
“We see a 20-30 basis point downside risk to our base predictions,” she said. For the time being, HDFC expects the GDP to rise 8.2% in the coming fiscal year.
What was India’s GDP in 1947?
However, as the country near the end of its 74th year of independence, it’s worth reflecting on how far it’s come in such a short time. India had a population of 340 million people at the time of independence. Its literacy rate was likewise shockingly low, at about 12%.
India’s population has expanded to about 1.4 billion people in the last seven decades, with a literacy rate of 74.37 percent in 2018 a remarkable feat given the chaotic period it experienced under British control.
India’s GDP was only 2.7 lakh crore when it gained independence in 1947, accounting for only 3% of the world’s total GDP. India overtook France to become the world’s fifth largest economy in 2018, trailing only the United States, China, Japan, and Germany.
According to the Ministry of Statistics and Programme Implementation’s latest data, India’s real GDP is Rs 147.79 lakh crore, accounting for 7.74 percent of world GDP in 2018. (accounting for purchasing power parity). This percentage was expected to climb to about 10% by 2024, but it’s unknown how the COVID-19 pandemic will appear as an economic reality in India in the coming years.
Agriculture accounted for more than half of India’s GDP at the time of independence. Agriculture now makes up just under 16 percent of the Indian economy, despite producing more than five times as much as it did in 1947, indicating the immense structural shifts that the Indian economy has undergone, particularly following the implementation of liberalisation policies in the early 1990s.
While the country’s prosperity since 1947 is unquestionably commendable, it has not been distributed evenly across the country. According to some estimates, India’s share of total world GDP plummeted to as low as 3.8 percent in 1952, prompting former Prime Minister Manmohan Singh to say that the country was the poorest country in the world in terms of per capita income at the turn of the twentieth century.
In this context, the World Bank’s 2017 per capita income statistic for India of $1,940 appears to be significant progress. However, a closer examination reveals that, despite being one of the world’s top five economies, India could not match the per-capita figures of the nations ranked above it in 2018. India’s per capita income was not even higher two years ago than that of some of its Asian neighbors, like Sri Lanka ($4,065), Bhutan ($3,110), and the Maldives ($10,536).
While detractors would argue that India’s large population invalidates any comparisons with those countries, it is worth noting that China, the only country with a population equivalent to India’s, had a per capita income four times greater in 2018.
In India, does WHO publish GDP data?
Today, the National Statistical Office (NSO) will announce GDP data for the current fiscal year’s July-September quarter. The Reserve Bank of India’s Monetary Policy Committee forecasted 7.9% GDP growth for this period during its October meeting. According to a Bloomberg projection by 14 economists, the number will be 8.1 percent. Aside from the headline figure, how should today’s GDP figures be interpreted? This question is answered by five graphs.
In 2020-21, India’s GDP decreased by a historic 7.3 percent. This was partly due to the 68-day nationwide lockdown that began on March 25, 2020, which resulted in a huge contraction in the first half of 2020-21 (April-September). In the quarters ending June 2020 and September 2020, India’s GDP shrank by 24.4 percent and 7.4 percent, respectively.
GDP growth of 0.5 percent and 1.6 percent in the quarters ending December 2020 and March 2021, respectively, returned the economy to normal. While GDP growth was 20.1 percent in the June quarter, it was lower in absolute terms than in the pre-pandemic quarter of June 2019.
The second wave of Covid-19, which peaked on May 9 in terms of seven-day average daily new cases, played a crucial role in derailing economic momentum once more in the June quarter. If the central bank’s forecast of 7.9% for the September quarter holds true, GDP for the quarter (
Do wars induce economic downturns?
The majority of wars in history have occurred in response to economic crises; there have been very few instances in which the world has experienced a slowdown or recession as a result of hostilities. After the First World War, the economy went into a three-year slump from 1918 to 1921.
What causes GDP to rise or fall?
The external balance of trade is the most essential of all the components that make up a country’s GDP. When the total value of products and services sold by local producers to foreign countries surpasses the total value of foreign goods and services purchased by domestic consumers, a country’s GDP rises. A country is said to have a trade surplus when this happens.
What factors influence a country’s GDP?
Workers will have more leisure time as a result of the increased leisure time available to them, which will allow them to participate in more recreational activities such as weekend terms and cultural activities.
Their efforts are, without a doubt, welfare-enhancing. However, their extra leisure hours are not valued in markets and so are not represented in GDP.
Factor Affecting GDP # 2. Non-Marketed Activities:
All economically significant activities are not traded on a stock exchange. Non-marketed economic activity are excluded from GDP with a few exceptions, such as government services. Unpaid housekeeping services are an example. Another example is non-governmental organization (NGO) volunteer activities, such as free volunteer service and education services provided to disadvantaged children in slums. Without a doubt, such unpaid and unpriced services improve social wellbeing. They are, however, excluded from GDP since estimating their market prices is challenging.
Factor Affecting GDP # 3. Underground Economy:
Many activities are carried out informally. From informal (private) nursing, house cleaning, and child care to organized crime, the underground economy encompasses both legal and illicit operations. Cash is used to pay house cleaners and plumbers. The tax authorities are unaware of such transactions. However, such activities have a negative impact on welfare. They may, without a doubt, increase or decrease societal wellbeing.