Finally, the GDP data of quarter 1 of the current fiscal year has been released, the declared growth is 20.1%, which is the highest economic growth ever in the history of India.
As we all know that the financial year(FY) of India is from March to April. And in the first quarter, we will count three months i.e April, May, and June. The data of three months comes after the delay of two months, so it was released on the 31st of August.
Let’s understand the value
The GDP data is released by the National Statistical Office(NSO) which comes under the Ministry of Statistics & Programme Implementation, Government of India.
NSO said that India’s gross domestic product(GDP) heaved 20.1% in the months of April-June(or Q1 of FY22), and it’s the best ever quarter growth. GDP in the first quarter of 2021-22 is estimated at Rs. 32.38 lakh crore, in the comparison of the first quarter of 2020-21(at constant). The format of three-month data was started in the mid of 1990, so the best-ever growth is concluded after the comparison 1990.
As we can see in the graph that after July 2018 the data was declining continuously but the problem occurs when in the first quarter of 2020 the data was on a great decline of -24.4% obviously it was because of the covid pandemic and it reduced to -7.4% in the second quarter of the previous fiscal year.
The data was 0.5% in the third quarter and then 1.6% in the last quarter of the previous Financial year. And now it’s 20.1%.
How are we calculating the growth?
So the growth of a quarter is determined by a comparison of the GDP value of a particular quarter with the previous quarters of the different years. So if we are saying that the 20.1% is best ever growth then it is compared by the data of the first quarter of different years. Let’s understand with an example.
In a simple way:
GDP simply determines the value of goods and services-producing in a country.
Let us assume that the value of GDP in the first quarter of 2019 was 100 rupees. Then the value of GDP was decreased by 24.4% in the first quarter of 2020, which means we are comparing Q1 of 2019 to the Q1 of 2020, then the value will become 75.6. Now in the first quarter of 2021, we are saying that the value grows 20.1% then now the value is 95.7. So I hope the how we determine the growth of GDP.
As we can see that the data is increased to 20.1% but as compare to the previous year and if we compare to 2019 which was before the covid pandemic then we can observe that the data is still negative and have a decline of 10%, which means the growth of the current quarter is on low-base effect. The base for the GDP data of 2021 was low that’s why the growth is major.
Actual Figures of GDP
The GDP value in the Q1 of 2019 was 35,66,708 Crores and in 2020 be slip down to 26,95,421 Crores then it goes up to 32,38,020 crores, which were we discussed earlier. Now we can observe that amount of 2021 is greater than that of 2020 but lower than 2019.
This amount of data is known as Real GDP because it measures the amount at 2011-2012 prices. This indicates that the actual amount is much greater than this real GDP. And it actually is. We can see clearly that the actual value is 51,22,877 crores in 2021(at the 2021 price), it is also known as Nominal GDP and in the Real GDP data was 32,38,020 crores in 2021(at 2011-12 price).
Gross Value Added (GVA)
GVA can be defined as the output value of intermediate consumption, this represents the Supply-side of the products and the GDP shows the demand side of the products. The evaluation of GVA doesn’t include value any taxes, this consists only of the supply value.
Let’s take an example, assume that there is a product of value 300 rupees then after all taxes and GST the price become 500 rupees then the in the evaluation of GVA the price will count as 300 rupees(without taxes) and for GDP the price will as 500 (with taxes). This indicates that the value of GDP will always be higher than GVA.
Like Gross Domestic Product, there is Real GAV at 2011-12 prices as we can see in table 3 and a GAV at the current price as we can see in table 4.
Now it can be concluded that the massive change of 20.1% has been happened because of the low base effect. But it’s a considerable great work by the government that they managed the growth after the Nationwide lockdown due to the covid Pandemic. If there was a full lockdown in the nation in the second wave then this could be 10 or 12 % instead of 20.1%. But if there was no second covid wave then the value could be 26 or maybe 30%.
But the challenge is not ver now, because if the third wave will come then it will definitely affect it badly. Previous year the Whole GPD was -7.3%(2020-21) and the predicted value by the RBI is 9.5%, but it all will depend on the third wave.