The National Statistical Office of Ministry of Statistics and Programme Implementation recently released the GDP print for Q1 of FY23 which came in at 26.7 per cent in nominal and 13.5 per cent in real terms over the corresponding quarter of FY22.
Unsurprisingly, the commentariat and economists dismissed it either as a low base effect or felt that the CAGR over the pre pandemic levels was insignificant.
Both these analyses are flawed. The former assumes economic activity is given but it’s a function of needs and choices, fostered by enabling policies and conditional upon the path traversed.
The latter assumes last two fiscal years to be period of normal economic activities forgetting the fact that world economy has been ravaged by the Covid-19 — once in a century event. So CAGR is appropriate over a period of normal economic activity.
The same class is also unenthused about the growth rate falling short of RBI’s forecast which assumed crude oil at $100 dollar per barrel. The projections of all major institutions including IMF about growth are constantly being revised due to dynamic global events.
The Q1 GDP growth rate was resilient in the face of the Russia-Ukraine war. The economy withstood the spillover of high oil and food prices. The Q1 performance is impressive given the severe headwinds faced by the economy. The GDP growth rate is broad based in comparison to Q1 FY22 or pre pandemic Q1 FY20 and is driven by contact intensive services sector of which all sub-sectors, except financial, real estate and professional services, ran up double digit growth year-on-year.
The construction sector, one of the largest generators of employment, barely crossed the pre pandemic Q1 FY20 level and trade, hotels, transport, communication and services related to broadcasting is still lagging. On the expenditure side, Gross Fixed Capital Formation to GDP, a proxy for private investments, is the highest in the last three fiscals signalling the industry’s confidence.
High GDP growth rate must translate into income generating opportunities. The Periodic Labour Force Survey – PLFS unemployment rate released recently came at 7.6 per cent for April-June 2022 quarter, the lowest since the survey began in 2018. The unemployment print strongly points to the fact that double digit GDP growth rate for FY23 Q1 came on top of job creation.
As per EPFO payroll data — covering organised sector workforce for those establishments which employ more than 20 workers — 47.3 lakh new formal jobs have been created in the first quarter in the current fiscal year while 21.58 lakh jobs were created for freshman and graduates in the 18-25 age group.
The number of jobs created in June is higher than the monthly average recorded during FY22.
EPFO data reinforces the PLFS survey which covers both organised and unorganised sectors.
India’s Q2 2022 growth must be seen from a global perspective. India’s GDP grew by 5.6 per cent quarter-on-quarter while that of OECD rose by meagre 0.3 per cent and the G7’s 0.2 per cent. India now pips the UK to be the fifth largest economy as per IMF estimates.
Indian economy, steered through economic shocks induced by Covid-19 and deftly managed by Modi government, remains the hulk of global economic activity. Yet there are challenges in the near and medium term. The Modi government must see through the high inflation, though trending downward, without further growth sacrifice. There’s high probability that world excluding India is drifting towards recession. The RBI must also come up with a roadmap for exchange rate management, institute new Foreign Trade Policy, and promote exports by leveraging free trade agreements while signing new ones.
The government’s large capex programme and China plus one theme must ensure flow of private investments. Agriculture, the largest employment generator and unscathed by economic shocks, should employ technology and undertake diversification on a mission mode. These moves will pave India’s way towards $5 trillion goal and beyond.
The writer is Joint Convener, BJP Telangana.