Udayan Hazarika
(The writer can be reached at udayanhazarika@hotmail.com)
After RBI, it's now Niti Aayug that is dreaming about a two-digit growth of Gross Domestic Product (GDP) for the current year. The Niti Vice-chairman Rajiv Kumar has recently disclosed in an interview with the press that the Indian economy will register double-digit growth in the current fiscal (2021-22). He, however, has not stated what his convictions are except stating that "the economic activities will be strengthened as we get into the second half of this (financial) year given what I have seen for example various indicators, including the mobility indicators." Earlier RBI had pegged the economic growth for the current fiscal at 9.5 per cent which indeed is an overenthusiastic expectation. These were only revised rates of RBI. Before this, RBI had set to achieve a growth rate of 18.5 per cent in Q1, 7.9 per cent in Q2, 7.2 per cent in Q3 and 6.6 per cent in Q4 i.e. an overall 10.5 per cent to be achieved during the fiscal year FY-22. Even before that, RBI's expectation was 11.53 per cent for the current year. Thus, within three months RBI has revised its calculation twice. Against all these, we have before us the figure for contraction of the economy to the tune of 7.3 per cent for the year ended on 31st March 2021 despite a 1.6 per cent growth in the Q4 of FY-21. In real terms, the growth in Q4 was only to the tune of 0.63 lakh crore. Under the above backdrop expecting a two-digit GDP growth on the back of a historic contraction is nothing but a misnomer.
Let us have a look at the sectors how they are doing in the first three months of the year (Q1) when as per RBI (revised), the economy is to grow by 18.5 per cent. The primary sector which has been doing well even during the lockdown last year has been in better shape than all other sectors. However, farm sector GVA was provisionally estimated at only 3.6 per cent growth in FY 21 as against 4.3 per cent growth in FY-20 indicating a contraction of about 20 per cent. The GVA in Q4 FY-21 was far more pathetic as it registered a 3.1 per cent growth only against 6.8 per cent for the same quarter in FY 20. Despite such high growth in the farm sector in FY- 20, the GDP grew only by 4.0 per cent (at 2011-12 base price) in FY-20. While all these statistics have been placed before us, Government took note of only the announcement of the Metrological Department about normal monsoon in July-June 21-22 while fixing the record target for production of 307.31 million tonnes for the current year as against 305.43 million tonnes of the crop for the year ended in June 2020. As regards sowing, the performance is not that satisfactory as till 25th June,
farmers have sown only 202.72 lakh hectares which is 55.9 per cent lower than the corresponding period of last year although there is a 1.5 per cent increment in the area under rice? Fertiliser sales have been an important indicator of growth in the agriculture sector. The data about fertiliser sales show that till May/21 the sale remained subdued at 65.87 LMT as against the last year's same period of 68.7 LMT.
Let us now have a look at the manufacturing sector. Overall Index of Industrial Production in May/21 has been estimated at 116.6 as against the pre-lockdown index of 129.9(Feb/2020). Thus, the sector still has a long way to go to reach the pre-lockdown level. In the manufacturing sector, which is responsible for about 78 per cent of General index still not picking up - in fact going down from the level of 125.4 in April/21 to 115.5 in May/21 indicating thereby a sharp fall in the output. This fall in output is mainly responsible for localized lockdowns imposed in many states due to the second wave of Covid-19. So it has a long way to go to reach the pre-Covid level of 129.7 (Feb/20). The only electricity sector has bypassed the pre-Covid level index of 153.9 registering a growth with the index as of May at 161.9. But this sector is responsible only for 8.0 per cent of the actual index. Thus, in the April and May of the current fiscal, the growth in index although appears to be 68.72 per cent as against the last year (2020), it is to be remembered that this growth is against the period which was under total lockdown due to Covid-19 and therefore there is nothing to rejoice. Now if we look at the PMI, in the manufacturing sector which indicates an expansion of the sector when the unit is above 50, we would observe that it has gone below 50 which is a sign of contraction. In June/21, the PMI for the manufacturing sector has fallen to 48.1 from 50.8 in May which was also just marginal. As a whole, the manufacturing sector is not in good tune in the first quarter of the current fiscal. The GVA of the manufacturing sector for the FY 21 was negative 7.2 as against negative 2.4 of the previous year even though Q4 FY21 had registered a convincing growth of 6.9 per cent at base price 2011-12.
The service sector has not improved since the last three quarters. In terms of Gross Value Addition (GVA), the construction sector has registered 8.6 per cent contraction in the year ended with 31st March 2021 even though there was a growth of 6.5 per cent in the Q3 and 14.5 per cent in the Q4 respectively. Trade, Hotel and transport etc sector has contracted 18.2 per cent. The sector had not recovered even in Q3 (-7.9%) and Q4(-2.3%). Immediately after Q4, the impact of the second wave has gripped the nation. There was lockdown in almost all the major urban centres where construction and tourism activities were picking up. Construction activities have been stalled in many areas due to a shortage of labour. Now there is also the indication of the third wave. The government have introduced many urban infrastructural schemes which are yet to be allocated State-wise and thus commencement of these schemes before the third quarter is a doubtful proposition. The first quarter of the current fiscal has already ended without having anything done on this front.
The size of the real GDP calculated for the last fiscal (2020-21) was Rs 135.13 lakh crore which had registered a negative growth of 7.3 per cent as against the previous year's (2019-20) real GDP of Rs145.69 lakh crore. A minimum two-digit growth compared to last year would require the economy to grow by Rs 13.51 lakh crore in real value to reach the size of Rs 148.64 crore which is not an easy task especially when the economy is yet to open up. Between 2018-19 and 2019-20, the increase in GDP was to the tune of only Rs 5.66 lakh crore which is to be doubled to get a two-digit growth rate. This is not to be forgotten that the service sector which is the worst sufferer from the pandemic, contributes around 60 per cent to the Gross Domestic product and therefore to achieve a two-digit growth of the economy revamping the service sector is a must.