The Ministry of Statistics released the first-quarter G.D.P. (gross domestic product) and G.V.A. (gross value added) for the first quarter of the current financial year. The government used the Year-on-Year (Y-o-Y) comparison method – showing a growth of 20% in the G.D.P. in Q1 this year compared to Q1 last year to claim India was experiencing a V-shaped recovery. On the other hand, several government critics used the Quarter-on-Quarter (Q-o-Q) method to claim that the economy was losing momentum since it showed a 17.7% contraction in Q1 this year as opposed to Q4 (January, February, March) of last year. In other words, which of these statements is accurate? How does the Indian economy currently stand? Two different views – the government’s and critics’ claims of a V-shaped recovery and a sharp contraction of the economy were inspired by two different comparisons.

G.V.A. thrived in Q1 FY2022, owing to gains in manufacturing and construction, whereas private consumption and investment engineered the growth in G.D.P. in YoY terms. However, all sectors remain well below pre-covid levels in the first quarter of FY2022. However, only agriculture and electricity experienced higher real G.V.A. in comparison to their pre-covid levels.

Overall, G.D.P.’s growth in Q1 was acceptable but not spectacular. It is below pre-pandemic levels, and the slowdown hit the economy then, and India Inc does not share the government’s or R.B.I.’s optimism regarding the economy. In the words of R.B.I. Governor, “we are not out of the woods yet.”

This year, the recovery is estimated between 8.3 percent (World Bank) and 10.5 percent (government), with 9.5 percent (I.M.F.) in the middle. In light of that, what happens next? Compared to the World Bank, India’s chief economic adviser forecasts a growth rate from 7 to 6.5 percent in 2022-23, before accelerating to 8 percent following that. According to the I.M.F., next year’s G.D.P. will grow by 8.5%. It is typical for such numbers to be revised substantially. The International Monetary Fund is well known for overestimating growth rates – its India growth projection dropped from 12.5% in April to 9.5% in July. Additionally, it needs to be kept in mind that officially recorded growth in the three years before the epidemic averaged only 5.8%.

The pandemic has also generated productivity gains from the organized sector, dislodging the unorganized, which will generate flow-through benefits for corporate profits and tax revenue. Productivity gains are also expected from the digitization of economic activity.

In addition, compare the last bout of rapid growth and current growth: an investment boom before the 2008 financial crisis versus a subsequent decline in investment as a share of the G.D.P. The employment ratio has fallen sharply as a result of another factor of production, i.e., labor. As with excessive corporate debt levels correcting, these numbers could rebound, but the organized sector’s profit-driven recovery will not be enough if the small- and medium-scale sectors do not recover. For the economy to grow at all engines, private and government investment, domestic demand, and exports must all be firing: The three need to be firing simultaneously. As the government has centered its investment strategy on growth, exports are on the rise.

As a result of pandemic-related supply chain issues, the global manufacturing industry decelerated in August 2021. The Chinese government implemented its zero-tolerance policy, resulting in factories and ports being closed due to outbreaks of Delta variant. Due to the Delta variant, many factories in Southeast Asia closed. Despite the predominantly strong global demand for manufactured products, factory and port interruptions, transportation capacity shortages, and hoarding of critical inputs have all negatively affected growth in the industry. This is particularly true for East Asia. Many countries have seen their inflation rates rise because of the growing gap between supply and demand.

Overall, the global economy is forecast to grow 6.0 percent in 2021 and 4.9 percent in 2022. Additionally, the 2021 global forecast remains unchanged from April 2021 W.E.O. Development prospects for emerging markets and developing economies have been downgraded for 2021, especially for emerging Asia. Advanced economies, on the other hand, are forecast higher. As the pandemic unfolds and as policy support changes, these revisions take into account these changes. As a result of additional fiscal support legislation expected in the second half of 2021 and improved health metrics, the uptick of 0.5 percentage points in 2022 is attributable mainly to the forecast upgrade of advanced economies, notably the United States.

(The author is a   Post-doctorate in   Economics and   Ph. D   in law and public policy.   A passionate Financial Economist and Law Expert)