The latest GDP estimates expectedly show that national output rebounded in Q1 of the current fiscal from the record contraction in April-June 2020, when the pandemic’s onset and the lockdown gutted the economy. National Statistical Office data show GDP expanded 20.1% from a year earlier, as every one of the eight industries spanning the broad agriculture, manufacturing and services categories posted positive growth. And gross value added, which aggregates output from all the eight sectors, grew by 18.8%. The numbers, however, show a different picture when compared with either the preceding quarter or the pre-pandemic first quarter of fiscal 2019-20. GDP at constant prices was estimated at ₹32.38-lakh crore, a 16.9% contraction from January-March’s ₹38.96-lakh crore and more than 9% shy of the ₹35.66-lakh crore in April-June 2019. That the second COVID-19 wave extracted a significant toll is evident. With the exceptions of electricity and other utility services and the non-contact intensive services grouping of financial, real estate and professional services, all other six industries posted double-digit quarter-on-quarter contractions. On the expenditures front, private consumption spending flattered to deceive, posting year-on-year growth of 19.3% but still shrinking by 17.4% from the preceding three months. And most disconcertingly, government consumption expenditure, which has invariably in the past helped shore up the economy, contracted 4.8% from a year earlier and 7.6% from the previous quarter.
Looking ahead rather than in the rear-view mirror, there have been signs of some traction in the current quarter as most States have gradually eased their localised second wave restrictions. Exports have been one of the bright spots as the U.S. and other western economies have ramped up vaccinations and posted economic recoveries that have underpinned demand for goods and services from India. And manufacturing has surged almost 50% year-on-year to be just under ₹24,000 crore short of the April-June 2019 output level. A fact borne out by the Manufacturing Purchasing Managers’ Index from IHS Markit, whose August release shows the sector experienced a second straight month of increase in production, albeit at a slower pace than July. Still, the same PMI survey also points to the challenges ahead. Rising raw material costs have been forcing manufacturers to either absorb the impact or raise prices, as several automakers have done, risking the prospect of dampening the already tenuous demand. And lingering uncertainty has led companies to yet again freeze hiring, according to IHS Markit. With monsoon rains in deficit, agricultural output and wider rural consumption also face a likely downturn. Policy makers must remain laser focused on expediting vaccination coverage and taking fiscal measures to ensure overall consumption demand does not weaken any further.