The Editorial Analysis: The Choppy Waters

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Economy in news: Relevance

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

According to the recent estimates, India’s gross domestic product (GDP) is reckoned to have grown 8.7% while the Gross Value Added (GVA) rose 8.1% in 2021-22.

Indian economy declined due to the COVID-19 lockdowns in 2020-21, however, the latest numbers show India is emerging out of the tunnel of pandemic-induced woes.
The overall GDP and GVA have indeed recovered from pre-pandemic levels, but only just, by 1.5% and 2.9%, respectively.
For one, it is not a V-shaped recovery, with GVA from job-creating sectors (trade and hotels) still 11.3% below 2019-20’s low levels.
While GVA from industry is up 6.7% over 2019-20, another job creating sector, construction, is up only 3.4%, while mining has grown a meagre 1.9% over the two-year period.
Manufacturing lifted the industry GVA, growing 9.3% from 2019-20 levels, but there are cracks on that front — the January to March 2022 quarter (Q4 of 2021-22) recorded a 0.2% contraction, year-on-year.

With reluctant demand, supply-chain and input cost woes hurting manufacturing, and public administration lifted the growth amid slower growth in Services and Mining.
A recovery in investment demand, helped by the Government’s capital spending, is a silver lining, but the lingering concern is that consumption remains troubled, and unless it recovers, private investments will remain aloof as will sustainable high growth.
Worse, as inflation flared up, households’ consumption growth has steadily dropped through 2021-22, growing a mere 1.8% in Q4.
Price rise, combined with higher interest rates, could squeeze middle class disposable incomes and dampen consumption further.

Yes, India is the fastest growing major economy and likely to remain so in 2022-23.
But the rising tide in the past year has not been enough to lift all boats stranded in the detritus of the pandemic and the slowdown that preceded it.

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