Financial authorities should boost consumption and investment to aid speedy recovery
Financial authorities should boost consumption and investment to aid speedy recovery
The latest official GDP estimates would be cause for joy under normal circumstances, as they clearly foreshadow a double-digit expansion in economic output in the first quarter. NSO forecasts 13.5% growth in GDP However, from the April-June period a year ago, however, the Reserve Bank of India (RBI) had forecast a pace of 16.2% only last month and points to an economy that is still looking for a strong foothold. Is. Faced with adversity – signs of a global recession and the Ukraine war – the tremendous momentum of the first quarter could put the economy on a very skewed growth trajectory, even as increasingly acceptable inflation erodes consumer confidence. Output across the eight broad sectors that combine to provide Gross Value Added (GVA) shows that while all sectors expanded year-on-year, public administration, defense and other services grew 26.3%, including Of the six regions posted gradual contraction. Only two service sectors — electricity, gas, water and other utility services, and financial and business services — reported growth of 12.6% and 23.7%, respectively, from the January-March quarter. The major employment-providing sectors of agriculture, manufacturing, construction and contact-intensive trade, hotels and transportation services sectors faced quarter-on-quarter contraction of 13.3%, 10.5%, 22.3% and 24.6%, respectively.
The demand side has flattered to cheat. Private final consumption expenditure, the essential backbone of the economy, revived with a year-on-year expansion of 25.9%, increasing its share in GDP to just 60%. However, when viewed sequentially, the estimated ₹22.08 lakh crore of private consumption expenditure in April-June 2022 was no less than ₹54,000 crore, or 2.4%, less than what was spent in the preceding quarter. And both government spending and gross fixed capital formation, which is seen as a proxy for private investment, shrank by 10.4% and 6.8%, respectively, quarter-on-quarter, reducing overall output. GDP, in fact, contracted by 9.6% sequentially, should be a cause for concern among policymakers. Noting that this year’s monsoon has distributed rain in an irregular scatter pattern, which has caused devastating floods in some parts due to lack of moisture to major paddy and pulse growing regions in northern and eastern India, rural The areas have potential for both agricultural production and consumer spending. take a hit. And global trade also calmed down amid a sharp slowdown in advanced economies, with India’s merchandise export momentum set to weaken, despite any gains from the rupee’s depreciation against the dollar. Since the RBI needs to focus on controlling inflation, the onus is on the fiscal authorities to boost consumption and investment.