Today’s Big Story
According to data published by the national statistical office on Tuesday, GDP in Q1 FY22 rose by 20.1%, compared to 1.6% year-on-year in Q4 FY21.
📯 What’s Going On?
If you are invested in the stock market, you may have noticed a sharp increase in your portfolio returns. A key reason for this bull run is yesterday's announcement by the Government that our economy grew at a record pace in the April-June 2021 quarter, compared to the same quarter last year, when India was in the midst of a nationwide lockdown.
🔍 What Does this Mean?
Many of the left argue that this is more of a statistical achievement and a low base effect (coming as it does on the back of extremely poor GDP figures over the past few quarters) is actually the reason behind India's growth surge, concealing a lot of ground distress.
Many on the right argue that this is actually a positive development given that we went through a second wave of the pandemic during the last quarter, pointing to recovery in sectors such as agriculture.
"India’s total output in Q1, whether measured through GDP or GVA, is nowhere near what it was in Q1 of 2019-20 (the year before the pandemic struck). In fact, both variables suggest India’s output levels are closer to 2017-18 levels. In other words, India produced the same amount of goods and services in Q1 this year as it produced in Q1 four years ago. The lofty increases in GDP and GVA are in percentage terms, and while they look good and should not be scoffed at, they are for the most part a statistical illusion created by the very low base set by the complete nationwide lockdown in Q1 of last year." - The Indian Express
"India’s GDP grew at 20.1% in the quarter ending June — in line with expectations — although the high number is the result, not of a V-shaped recovery in the economy, but a favourable base effect. Compared to the last quarter of 2020-21, the country’s GDP actually contracted by 16.9%, although this can be attributed to the bruising second wave of the pandemic in April and May. And compared to the first quarter of 2019-20, it contracted 9.2%." - Hindustan Times
"India recorded the best-ever quarterly GDP growth at 20.1% in Q1 as against 1.6% in the previous quarter. According to govt data, the core sector growth is at 9.4% in July as against (-) 7.6% in the previous year. Meanwhile, India's fiscal deficit in April-July, the first four months of the fiscal year, stood at Rs 3.21 lakh crore ($43.98 billion), or 21.3 percent of the budgeted target for the whole year." - Times of India
"The GDP print of 20.1 percent is at par with consensus estimates. As per a poll of 41 economists by news agency Reuters, India’s GDP was expected to rise 20 percent in April-June 2021. We had said last year that the economy will show a V-shaped recovery. While there has been a health impact of the second wave, the economic impact has not been that large," said Chief Economic Advisor Krishnamurthy Subramanian." - Moneycontrol
💭 Why Should I Care?
A Picture of Pain and Hope
While it is true that this is a statistical achievement and it's debatable if we truly have had a V-shaped recovery, it is also true that we went through long periods of state-imposed lockdowns during the second wave earlier this year so reaching even a 90% GDP recovery of pre-pandemic levels is noteworthy. It can be argued that we haven't really experienced human tragedy to the degree we saw during the second wave in independent India's history.
However, according to data released by the Ministry of Statistics and Programme Implementation, there are several key areas where economic activity is still below pre-pandemic times - mining and quarrying, manufacturing, construction, trade, hotels, transport, communication, real estate, public administration and defense.
Moreover and worryingly so, a lot of GDP data comes from corporate, listed companies' financials. But there is real distress in the informal sector which is not adequately captured in the growth percentages. Even with corporates, a lot of the recorded profits and achievements in key financial figures have taken place through wage cuts and job losses.
So, as much as we focus on GDP growth as a measure of economic recovery, we also need to focus on adding jobs and controlling inflation for a true picture of India’s economic health.
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💡 Below the Fold
Is your name ruining your life? Turns out names can often close doors.
“My mum named me after the Bollywood actor Amitabh Bachchan, a suave star of Indian cinema in the 1970s and 1980s, and a reference that was entirely lost on my classmates at school in a very white part of southern England in the early 2000s…Did your application get rejected because you don’t have enough experience? Or did it just get binned because they couldn’t be bothered to learn how to say your name?”
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