Pandemic blow was milder

by Manasi Swamy

The National Statistical Office’s (NSO) latest GDP estimates suggest that the adverse impact of the Coronavirus pandemic induced lockdowns on the Indian economy was far lesser than gauged earlier. While the NSO has retained its seven per cent real GDP growth forecast for 2022-23, it revised its estimates upwards for the preceding two years. These revisions have lowered the magnitude of fall in GDP for the Coronavirus-struck year 2020-21 to 5.8 per cent from 6.6 per cent earlier. The GDP growth estimate for the subsequent year 2021-22 now stands revised upwards at 9.1 per cent from 8.7 per cent. This yields a much higher real GDP of Rs.159.7 trillion for 2022-23 as compared to Rs.157.6 trillion estimated earlier, sans any revision in growth rate for the current fiscal. The point-to-point GDP growth between the pre-pandemic year of 2019-20 and the current fiscal now stands at 9.9 per cent, which is considerably higher than the previous estimate of 8.6 per cent.

The NSO releases six estimates of GDP for a fiscal year, including two advance estimates, a provisional estimate and three revised estimates. It releases these in a staggered manner over a span of three years, incorporating the information that flows in with a lag.

The NSO now estimates consumption expenditure to have taken a smaller hit during the pandemic and also to have staged a faster recovery than reckoned before. The revised estimates have alleviated the fall in private final consumption expenditure (PFCE) in 2020-21 to 5.2 per cent from six per cent. The recovery estimated for the following year has been strengthened to 11.2 per cent from 7.9 per cent. Further, the NSO expects the rate of improvement to moderate to 7.3 per cent in the current fiscal. This is slower than the 7.7 per cent growth anticipated earlier. Nonetheless, PFCE growth between 2019-20 and 2022-23 now works out much stronger at 13.2 per cent as compared to the 9.2 per cent earlier.

Similar is the story of investment demand measured by gross fixed capital formation (GFCF). After the recent revisions, the NSO’s point-to-point GFCF growth estimate for the period 2019-20 to 2022-23 stands at 18.1 per cent which is substantially higher than the earlier estimate of 15.7 per cent. According to the latest estimates, GFCF contracted by 7.3 per cent in 2020-21, bounced back by 14.6 per cent in 2021-22 and improved further by 11.2 per cent in 2022-23. The downward movement in GFCF in 2020-21 shown by the earlier estimates was much steeper at 10.4 per cent, although the recovery depicted from there onwards was almost similar to the one presented in the latest estimates.

According to the NSO’s latest estimates, government final consumption expenditure (GFCE), which is revenue expenditure of the Central and the State Government excluding interest payments and subsidies, increased by only 6.9 per cent in real terms between 2019-20 and 2022-23. The growth was evenly spread across these years - about one per cent each. The GFCE growth between 2019-20 and 2022-23 implied by the earlier estimates was much higher at 9.6 per cent.

The NSO’s estimates for the supply side of the economy reiterate the story of the demand side. As per its latest estimates, real gross value added (GVA) grew by 11.2 per cent between 2019-20 and 2022-23. The previous estimates implied the growth to have been lower at 9.8 per cent. The NSO has upward revised GVA estimates for all segments of the economy, but for mining & quarrying and public administration, defence & other services.

According to the latest estimates, GVA declined by 4.2 per cent during 2020-21, the year when the Coronavirus pandemic hit India. The NSO had earlier estimated the fall to have been steeper, 4.8 per cent.

The NSO now estimates the electricity, construction, trade, hotels, transport, communication & broadcasting services segment to have taken a smaller blow during 2020-21 than estimated earlier.

A rather extra-ordinary takeaway from the revised estimates of NSO is that the manufacturing GVA grew by 2.9 per cent during the year crippled by the lockdowns. Earlier, the NSO had estimated a 0.6 per cent contraction in manufacturing GVA for 2020-21. The latest estimates suggest that public administration, defence & other services played a bigger role in pulling down the overall economy in 2020-21 than reckoned before, with a 7.6 per cent contraction in its GVA as compared to the earlier estimate of a 5.5 per cent fall. The support lent to the economy by the agricultural sector amid the pandemic was stronger with a 4.4 per cent expansion in its GVA in 2020-21 as against the 3.3 per cent rise estimated earlier.

The NSO’s latest estimates also suggest that most of the sectors recovered faster from the pandemic blow in 2021-22 than reckoned before. These peg the growth in aggregate GVA for the year at 8.8 per cent, higher than the 8.1 per cent growth estimated earlier. The NSO has kept its GVA growth estimates for the current fiscal virtually unchanged at 6.7 per cent.

Thus, the NSO’s latest GDP and GVA estimates indicate that the economy did much better in the recent past compared to earlier estimates but that does not make a difference to growth estimates for the current year.