India’s gross domestic product (GDP) is reckoned to have grown 8.7% while the Gross Value Added (GVA) rose 8.1% in 2021-22, as per national income estimates released on Tuesday. Coming on the back of the sharp decline in economic activity due to the COVID-19 lockdowns in 2020-21, when GDP crashed 6.6% and GVA by 4.8%, the latest numbers show India is emerging out of the tunnel of pandemic-induced woes. The overall GDP and GVA have indeed recovered from pre-pandemic levels, but only just, by 1.5% and 2.9%, respectively. Remember that growth had already been on a steady decline through 2019-20 even before the lockdowns of 2020 — with GDP growing just 3.7%. The Government’s assertion that the data establish a ‘full economic recovery’ is not entirely true. For one, it is not a V-shaped recovery, with GVA from job-creating sectors (trade and hotels) still 11.3% below 2019-20’s low levels. This has kept the services sector, as a whole, in line with pre-COVID levels, not above. While GVA from industry is up 6.7% over 2019-20, another job creating sector, construction, is up only 3.4%, while mining has grown a meagre 1.9% over the two-year period. Manufacturing lifted the industry GVA, growing 9.3% from 2019-20 levels, but there are cracks on that front — the January to March 2022 quarter (Q4 of 2021-22) recorded a 0.2% contraction, year-on-year. Overall GDP growth slipped to a four-quarter low of 4.1% in Q4, down from 5.4% in Q3, evoking flashbacks of the 2019-20 slowdown and raising concerns about the trajectory going forward.
With reluctant demand, supply-chain and input cost woes hurting manufacturing, agriculture (that grew at a five-quarter high of 4.1%) and public administration services (whose growth dipped to 7.7% from 16.7% in Q3) lifted the Q4 numbers amid slower growth in Services and Mining over Q3, and a mild 2% uptick in Construction. A recovery in investment demand, helped by the Government’s capital spending, is a silver lining, but the lingering concern is that consumption remains troubled, and unless it recovers, private investments will remain aloof as will sustainable high growth. Private final consumption expenditure grew 7.9% in 2021-22, but it was just ₹1.2 lakh crore or 1.4% over 2019-20. Worse, as inflation flared up, households’ consumption growth has steadily dropped through 2021-22, growing a mere 1.8% in Q4. Price rise, combined with higher interest rates, could squeeze middle class disposable incomes and dampen consumption further. Yes, India is the fastest growing major economy and likely to remain so in 2022-23. But the rising tide in the past year has not been enough to lift all boats stranded in the detritus of the pandemic and the slowdown that preceded it. The waters are choppy with war and recession worries in the developed world.