New Delhi (08.01.2021): Fuelling the persisting debate on the state of the economy, the government on 07/01/2021 released for public consumption the first advance estimate (AE) of the economy for FY21. The AE projected a -7.7% deceleration, which is slightly higher than the RBI's -7.5%, but far lower than ADB's -8%, WB's -9.6%, Goldman Sachs' -10.3%, and Moody's -10.6%. What amused everyone was this statement from the Finance Ministry: “The Advance Estimate of 2020-21 reflects a continued resurgence in economic activity in Q3 (October-December) and Q4 (January-March) — which would enable the Indian economy to end the year with a contraction of 7.7 percent. The continuous quarter-on-quarter growth endorses the strength of economic fundamentals of the country to sustain a post-lockdown V-shaped recovery.” While the government's AE projection, based on the statistics of only two quarters instead of three quarters, may or may not come true, it's definite now that the per capita GDP in FY21, estimated at Rs. 1.43 lakh in nominal terms or roughly below $2,000 on PPP (purchasing power parity) basis, may degrow or shrink by over 5%. The per capita GDP deceleration figures indeed run the risk of being exceeded because the informal sector, which employs the country's 90% workforce and contributes about 50% of GDP, is not seen to have picked up momentum as yet. The government's AE projection could have looked more realistic if it were based on verifiable data from the informal sector. However, the problem is that the data from this critical sector would not be available before a year or so. (By Rakesh Ranjan)
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Debate on economy resumes
By Rakesh Ranjan - 2021-01-08 12:42:00
New Delhi (08.01.2021): Fuelling the persisting debate on the state of the economy, the government on 07/01/2021 released for public consumption the first advance estimate (AE) of the economy for FY21. The AE projected a -7.7% deceleration, which is slightly higher than the RBI's -7.5%, but far lower than ADB's -8%, WB's -9.6%, Goldman Sachs' -10.3%, and Moody's -10.6%.
What amused everyone was this statement from the Finance Ministry: “The Advance Estimate of 2020-21 reflects a continued resurgence in economic activity in Q3 (October-December) and Q4 (January-March) — which would enable the Indian economy to end the year with a contraction of 7.7 percent. The continuous quarter-on-quarter growth endorses the strength of economic fundamentals of the country to sustain a post-lockdown V-shaped recovery.”
While the government's AE projection, based on the statistics of only two quarters instead of three quarters, may or may not come true, it's definite now that the per capita GDP in FY21, estimated at Rs. 1.43 lakh in nominal terms or roughly below $2,000 on PPP (purchasing power parity) basis, may degrow or shrink by over 5%. The per capita GDP deceleration figures indeed run the risk of being exceeded because the informal sector, which employs the country's 90% workforce and contributes about 50% of GDP, is not seen to have picked up momentum as yet.
The government's AE projection could have looked more realistic if it were based on verifiable data from the informal sector. However, the problem is that the data from this critical sector would not be available before a year or so.
(By Rakesh Ranjan)
