Economy grows 20.1% in Q1
What’s in the news?
- According to the data released by the National Statistical Office, the Indian economy grew at a record pace of 20.1 per cent in April-June 2021 compared with the corresponding period last year, when a national lockdown due to the Covid-19 pandemic had nearly halted all economic activities. The GDP had contracted 24.4 per cent in April-June 2020.
- The first quarter’s high growth rate, however, has come despite a brutal second wave of the pandemic which peaked in April-May.
- This is the fastest quarterly growth witnessed by India since such data began to be released in the mid-1990s.
- The jump in GDP numbers is mainly due to a weak base last year and also a rebound in consumer spending during the quarter.
What is meant by ‘low base effect’?
- One of the major reasons for this phenomenal jump in GDP is the low base effect. That means the base year or month with which the figure is being compared.
- For quarterly or annual GDP data, comparison is always made with the same quarter last year or growth over last year’s GDP.
- The Q1 GDP growth of 20.1% per cent is, therefore, in comparison to that GDP data recorded in the same quarter last year.
- When the pandemic struck in 2020, the government imposed a strict nationwide lockdown to curb the spread of the virus. This had a massive impact on the Q1 GDP growth which slumped by a record 24.4 per cent to Rs 26.95 lakh crore as compared to Rs 35.7 lakh crore reported in Q1 of 2019-20.
- As for the period under consideration, the GDP figure stands at Rs 32.38 lakh crore, up 20.1 per cent from Rs 26.95 lakh crore reported in Q1 of 2020-21.
- However, the GDP at Constant (2011-12) prices in Q1 of 2021-22 (Rs 32.38 lakh crore) is still 9.2% lower than the GDP in the same period during the pre-Covid year 2019-20.
- Apart from the low base effect, there are other significant reasons too which suggest a recovery in the economy.
- The GDP data shows that sectors including ‘agriculture, forestry and fishing’ and ‘electricity, gas, water supply and other utility services’ are above the levels of the pre-Covid year of 2019-20. Agriculture and electricity sectors have grown 8.21% and 3%, respectively, compared with April-June 2019-20.
- Many sectors like retail, auto sales, farm output, construction and exports have picked up since June.
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