Post Mortem

Indian economy: Back on track and at pre-covid levels

By Nagaland Post | Publish Date: 12/6/2021 1:34:11 PM IST

 From negative growth rate of Gross Domestic Product Indian economy has got momentum to come out and recovery gathered pace India has staged a smart recovery and the growth momentum is strong. India’s economy continued to expand after having dealt with the economic disruption seen during the covid-19 aided lockdown. The Indian economy remained on track to post the fastest growth among major economies this year as its GDP expanded by a better-than-expected 8.4 per cent in the July-September quarter to cross pre-pandemic levels led by a low base of (-) 7.4 per cent in the corresponding period last year as per the data by the national statistical office. In value terms, the GDP stood at Rs 35,73,451 crore in July-September 2021-22, higher than the Rs 35,61,530 crore in the corresponding period of the 2019-20 financial year.

This is the fourth consecutive quarter of positive growth after a two-quarter negative growth witnessed last year. This number is important because it captures a phase that sits in between a sharp recovery after the second Covid-19 wave battered growth earlier in the year and the news of the new variant, which bring with it fresh uncertainties. Second, it might offer an indication of how broad-based the recovery has been. And third, it would offer some guidance on what most analysts cite as a positive during the quarter — higher government spending in September and the boost from the reopening gains amplified by festive spending. 

According to the NSO data, gross value added (GVA) growth in the manufacturing sector accelerated to 5.5 per cent in the second quarter of 2021-22, compared to a contraction 1.5 per cent a year ago. Farm sector GVA growth was up at 4.5 per cent, compared to 3 per cent growth earlier. Construction sector GVA grew by 7.5 per cent compared to a degrowth of 7.2 per cent earlier. Mining sector grew by 15.4 per cent, as against a contraction of 6.5 per cent. Electricity, gas, water supply and other utility services segment posted growth of 8.9 per cent in the second quarter of this fiscal, against 2.3 per cent expansion a year ago.

On the demand side, the sequential improvement has largely been broad-based, across private consumption, investment and exports, although with imports also rising, net exports’ contribution to GDP growth fell to -4.4pp in Q3 from -3.6pp in Q2. 

On the supply side, GVA growth surpassed expectations at 8.5% y-o-y. The services posted stellar growth of close to 10% y-o-y (9.2% q-o-q, sa in Q3 vs -12.8% in Q2), with the unorganised labour-intensive sectors.

But there were still many worrying areas, particularly the insipid private consumption spending that still languished below pre-COVID levels along with activity in employment-intensive sectors like construction and contact-intensive sectors like retail and hotels.

The Indian economy is definitely showing signs of emerging from the COVID-19 induced economic setback. High-frequency indicators such as IIP, PMI & core sector data also point to improvement in economic sentiment. However, a sustained economic recovery will require all major sectors to bounce back to pre-pandemic levels.

Prof Mithilesh Kumar Sinha, 

Nagaland University, Lumami

Launched on December 3,1990. Nagaland Post is the first and highest circulated newspaper of Nagaland state. Nagaland Post is also the first newspaper in Nagaland to be published in multi-colour.

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