The Editorial Analysis- Slow Improvement

Both government spending and gross fixed capital formation, which is viewed as a proxy for private investment, shrank quarter-on-quarter by 10.4% and 6.8%, respectively, undermining overall output.

Table of Contents

NSO’s Official GDP Estimates 2022- Relevance for UPSC Exam

GS Paper 3: Indian Economy:
- Issues relating to planning, mobilization of resources, growth, development and employment.

NSO’s Official GDP Estimates 2022 in News

Recently, the National Statistical Office (NSO) released the latest official GDP estimates for the Indian Economy.

NSO 77th Round Report: Situation of Agricultural households in India

NSO’s Official GDP Estimates 2022- Key Findings

Quarterly Growth: The NSO estimates an 13.5% growth in gross domestic product (GDP) from the year-earlier April- June period.
Performance of Various Sectors of Economy:
- Only two services sectors — electricity, gas, water and other utility services, and financial and professional services — logged expansions from the January-March quarter, growing by 12.6% and 23.7%, respectively.
- The major employment-providing sectors of agriculture, manufacturing, construction and the contact-intensive trade, hotels and transport services sector suffered quarter-on-quarter contractions of 13.3%, 10.5%, 22.3% and 24.6%, respectively.
Private final consumption expenditure, the essential bulwark of the economy, appeared to have revived with a year-on-year expansion of 25.9% lifting its share in the GDP to just shy of 60%.
Both government spending and gross fixed capital formation, which is viewed as a proxy for private investment, shrank quarter-on-quarter by 10.4% and 6.8%, respectively, undermining overall output.

Associated Concerns with NSO’s Official GDP Estimates 2022

Slower than RBI’s Estimates: It is disconcertingly slower than the 16.2% pace that the Reserve Bank of India (RBI) had projected just last month.
- It points to an economy that is still in search of a firmer footing.
May Lead to Slower Growth: Faced with headwinds- signs of a global recession and the Ukraine war- the first-quarter’s underwhelming momentum may pitch the economy into a far shallower growth trajectory.
- This is even more concerning when faster-than-acceptable inflation erodes consumer confidence.
Uneven Growth: Output in the eight broad sectors shows that while year-on-year all sectors expanded, with public administration, defence and other services growing 26.3%, six of these sectors posted sequential contractions.
- Output in these eight broad sectors combine to provide the Gross Value Added (GVA).
Poor Performance on sequential Basis: GDP contracted 9.6% sequentially should be a cause for concern among policymakers.

Expected Headwinds to India’s Growth

Given that this year’s monsoon has distributed rains in an erratic scattershot pattern that has caused disruptive flooding in some parts while leaving key paddy and pulses growing areas in northern and eastern India moisture deficient, both farm output and consumer spending in the rural hinterland are likely to take a hit.
And with global trade also becalmed amid the sharp slowdown in advanced economies, India’s merchandise exports are sure to weaken in momentum, any benefits from the rupee’s depreciation against the dollar notwithstanding.