May 31, 2023

GDP: Uneven Growth, Some Sectors Still Behind

By Ashwini Agarwal
First publised on 2022-01-09 07:45:27

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Advance estimates for GDP for FY22, released by the National Statistics Office (NSO), show that the economy is on track to grow at 9.2% for the full financial year. In absolute terms, the Indian GDP is expected to be Rs 147.53 lakh crore at the end of FY22 which would be 1.26% higher than FY20, the last full year before the pandemic. The growth is largely driven by agriculture, manufacturing and services.

The best thing is that the estimates show that the economy has recovered from the body blow delivered by the nationwide lockdown at the start of the pandemic in 2020 and then several local restrictions in the second wave in 2021. It also shows that the supply constraints have been overcome and raw materials are reaching factories and finished goods are reaching markets smoothly.

But what it does not show is that private consumption levels are still muted. They were muted in 2019 too and the economy was suffering from low demand. But the pandemic seems to have further depressed demand. Private consumption is set to grow to just Rs 80.83 lakh crore, which is 2.8% lower than the pre-pandemic level. The overall increase is GDP is largely due to increase in prices of goods while the number of units sold or quantity consumed has not increased correspondingly.

Another factor that needs deeper examination is that some sectors are still bleeding. Also, the informal sector has not recovered from the impact of Covid restrictions and job losses and business closures in the sector are at an all-time high. With the third wave now upon us, the Finance Minister will have to look into the problems of the sectors that have not recovered and the informal sector, as also small businesses. They need to be supported further. Also, with the GDP estimates offering Sitharaman headway on fiscal deficit, the government must seriously think of making huge investments in infrastructure to drive the growth to higher levels.