Impacts and importance of GDP revised estimates

Source – The Indian Express

Syllabus – GS 3 – Indian Economy and issues relating to planning, mobilization, of resources, growth, development, and employment.

Synopsis – Revised estimates of GDP are released. It would impact the growth prediction and levels of the future National Income.

Introduction

• Last week all major financial publications were released i.e. economic survey, budget, and 1st bi-monthly monetary policy review.
• However, the first revised estimate of GDP growth in 2019-20 was not highlighted.
• This revision has not only revised the 2019-20 GDP growth rate, but also the GDP growth rate for 2017-18 and 2018-19.
• Accordingly, GDP estimates for 2019-20 have been revised from 4.2% to 4 percent. For 2017-18 revision is from 7% to 6.8% and for 2018-19 it is from 6.1% to 6.5%.

What are the key takeaways from GDP revision?

• First, There have been many revisions of GDP estimates. The growth rate is still not certain. For example, for 2016-17 the GDP growth rate went up from 7.1%, as per the First Advance Estimates, to 8.3% in the final analysis.
• Second, revision in 2019-20 figures is important for the base year effect. Due to COVID-19 disruptions in 2020-21, the GDP figures of 2019-20 becomes important for the comparison. Lower estimates in 2019-20, can result in higher figures of 2020-21 and 2021-22.
• Third, India’s GDP growth rate already going downwards from 2016 i.e. following an inverted-V shape. The COVID-19 pandemic brought that to a complete halt. Thus, a “V-shaped” recovery, which is being talked about by the expert is meaningless. For an actual recovery, the gains should first surpass the level of 2019-20.

Way forward-

The pandemic did not change the growth trajectory [it was already going down], it only made the decline even more precipitous.