NS Latest GDP Estimates National output is expected to pick up again in the first quarter of the current fiscal from a record contraction in April-June 2020, when the onset of the pandemic and the lockdown hit the economy. Data from the Office for National Statistics showed GDP expanded 20.1% from a year earlier, as each of the eight industries spanning the broader agriculture, manufacturing and service categories posted positive growth. and Gross Value Added, which combines output from all eight sectors, increased by 18.8%. However, the numbers paint a different picture as compared to the previous quarter or the pre-pandemic first quarter of FY 2019-20. GDP at constant prices was estimated at ₹32.38-lakh crore, a 16.9% contraction from ₹38.96-lakh crore in January-March and just shy of 9% from ₹35.66-lakh crore in April-June 2019. That second COVID- 19 wave took a significant toll is clear. With the exception of the non-contact intensive services group of electricity and other utility services and financial, real estate and professional services, all other six industries posted double-digit quarter-on-quarter contraction. On the expenditure front, private consumption spending is flatter to cheat, posting a year-on-year growth of 19.3%, but still falling 17.4% from the past three months. And most disappointingly, the government’s consumption expenditure, which has always helped boost the economy in the past, declined by 4.8% from a year ago and 7.6% from the previous quarter.
Looking ahead rather than in the rear-view mirror, the current quarter has shown signs of some traction as most states gradually ease their localized second wave restrictions. Exports have been one of the bright spots as the US and other Western economies ramp up vaccinations and post economic reforms that have dampened demand for goods and services from India. And manufacturing has grown nearly 50% year-on-year to Rs 24,000 crore from April-June 2019 output levels. A fact generated by IHS Markit’s Manufacturing Purchasing Managers’ Index, whose August release shows the sector experienced a second consecutive month of production growth, albeit at a slower pace than in July. Yet the same PMI survey also points to the challenges ahead. Rising raw material costs are forcing manufacturers to either absorb the impact or raise prices, as many automakers have done, risking the prospect of subduing already weak demand. And according to IHS Markit, uncertainty has kept companies from hiring again. Along with the deficient monsoon, agricultural production and widespread rural consumption are also facing a potential decline. Policy makers should remain focused on accelerating vaccination coverage and taking fiscal measures to not further weaken aggregate consumption demand.
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