“The figures are like bikinis,” said American professor Aaron Levenstein. “What they reveal is suggestive, but what they hide is important.”
The June quarter gross domestic product (GDP) figures are a great example of this.
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The real GDP for the period was 36.85 trillion. Real GDP, adjusted for inflation, was 13.5% higher than GDP for the same period last year. Forecasts of most economists say that the growth will be more than 15%. The double-digit growth is mainly due to the second wave of COVID-19 due to a fall in economic activity from April to June 2021.
Further, the GDP for the June quarter was 36.3% higher than the GDP for the same period in 2020. However, the thing to remember is that the country was under lockdown during April 2020 and there was a good part of May 2020, which was gloomy. economic activity.
Therefore, the right way to look at GDP for the June quarter is to compare it with the June quarter of 2019, before the pandemic started. The overall GDP growth over the three-year period since then is 3.84%, meaning the annual growth is 1.26%. So, the economy has barely grown in the last three years.
In comparison, if the economy grows at 6% per annum, the GDP from April to June would be 42.27 trillion against actual 36.85 trillion. difference of 5.42 trillion is the economic opportunity cost of Covid.
A popular method of calculating GDP includes private consumption expenditure, investment, government expenditure and net exports (exports minus imports). In India, private consumption forms a significant portion of GDP and has declined due to the negative impact of COVID. Yet, in three years, it has increased 22.08 trillion, which means a little over 3% per year.
This suggests that a large part of the population is still covered on the expenditure front. This can be gauged from a number of consumption indicators. Two-wheeler sales during the June quarter were significantly higher than the same periods in 2021 and 2020, but lower than sales in each of the three months ending June 2014 to 2019.
Data from Nielsen IQ shows volume growth for fast-moving consumer goods (FMCG) firms remains in negative territory, with a contraction of 0.7% during the three months ended June 30. This means that FMCG companies are selling fewer units of their products than before.
Rural India is in crisis, it can also be gauged from the work sought under Mahatma Gandhi National Rural Employment Guarantee Scheme (MNREGA). During the three months to June, the work demanded in 2019 has been around 20% more than the demand during the same period.
In addition, the huge gap between imports and exports dragged GDP growth below what economists had expected. exports for the period were 8.45 trillion while imports were 11.43 trillion, leading to a net export figure of (-) 2.98 trillion. This is the highest ever deficit and is a negative entry in the GDP calculation. This has pulled GDP below the level that was predicted. Imports have been very high, mainly due to high prices of oil and other commodities.
Still, things are improving, albeit slowly. The contraction in FMCG volumes is easing. The sale of two wheelers is increasing. Along with this, the works demanded under MNREGA are also decreasing. Moreover, investments are growing fast despite being very slow. Now only if the Russian invasion of Ukraine ended.
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