When is the last time when a 20.1% growth rate for the GDP in a quarter was recorded? Perhaps never. Numbers illuminate. Numbers also obfuscate. While the growth rate for Q1 might look spectacular, it was powered by a low base effect since this growth is compared to the figure of April-June period last year, when the country was under a blanket nationwide lockdown and reported an almost 24% contraction. Most of the sectors – agriculture (4.5%), manufacturing (49.6%), construction (88.3), mining (18.6%), electricity generation (14.3%) – performed in line with expectations this year as the economy struggled to keep its head above water despite the savage second wave of the pandemic. However, a few sectors such as services failed to match the growth in other sectors.
Experts said domestic consumption is trailing growth in production and is yet to turn into a driver of the economy. Exports have done well, accounting for about 20% of the GDP. However, analysts said that the export performance was more due to lackluster show of domestic consumption. Looking forward, rise in demand and the severity of the third wave might become determinants of the growth of the economy in the rest of the year.
Perhaps the brightest spot in the performance was tax collection. In the April-July period, this figure reached Rs 5.29 lakh crore compared to Rs 3.39 lakh crore in Q1 of FY20, a Covid-free period. However, the rise in expenditure of the government between Q1 FY19 and Q1 FY22 was about Rs 0.5 lakh crore.
While the 20.1% figure is largely due to the low base of Q1 in FY21, it does provide a platform for the government to turbo-charge growth-oriented policies this year. It also broadly indicates that the growth focus has worked to a fair degree. If consumer sentiments improve and aggregate demand rises, the growth momentum can continue in the subsequent quarters. However, policymakers must ensure that growth should be as even as possible in different sectors and should generate employment, which should be the top priority for the government. With buoyancy in revenue generation, policymakers could spend in infrastructure to create jobs and create economic assets as well.
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