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Resource centre on India's rural distress
 
 

A disconnect that shows the real state of the country’s economy -Himanshu

-Livemint.com

* Disaggregated data contradicts the rosy picture that national accounts paint of our performance

* It’s premature to conclude that a recovery is underway, as our GDP rise in 2020-21’s third quarter was on a very low base. Also, other data sets reveal that distress remains widespread.

 Estimates of growth in the third quarter of 2020-21 along with advance estimates of the full year were released last month by India’s statistics ministry. These showed that the country’s gross domestic product (GDP) increased 0.4% year-on-year in the October-December quarter, thus breaking the previous two quarters’ trend of declining GDP. Along with this, the advance estimates also revised the full year’s decline in GDP to 8% from 7.7%. That the economy had finally moved into positive growth territory was seen as a sign of economic recovery, with many claiming that the worst may finally be over as far as the covid pandemic’s impact is concerned.

Unfortunately, such a conclusion is based on nothing more than a statistical illusion. The positive growth on a year-on-year basis is largely a result of the weak output of the third quarter of last fiscal year, when growth in gross value added (GVA) was the lowest since the introduction of the new series of national accounts. In fact, GVA growth in the third quarter of last fiscal was the lowest in more than a decade. Given that the economy was already in the midst of a severe slowdown, even the next quarter is likely to show expansion, but this is largely a result of a low base. It is not a recovery in any true sense.

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