{"id":71531,"date":"2020-12-03T16:32:31","date_gmt":"2020-12-03T11:02:31","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=71531"},"modified":"2021-05-10T15:20:43","modified_gmt":"2021-05-10T09:50:43","slug":"gdp-recovery-questionable-data","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/gdp-recovery-questionable-data\/","title":{"rendered":"GDP recovery- questionable data"},"content":{"rendered":"<p><strong>Context-<\/strong> The Q-2 sharp recovery is very tactical because of pent-up demand, because of lockdown and the Data used for quarterly growth rates are weak and questionable.<\/p>\n<p><strong>What in the news-<\/strong><\/p>\n<p>The second quarter GDP contracted at a slower pace of 7.5 percent compared to a massive 23.9 percent in the first quarter of the current fiscal.<\/p>\n<ul>\n<li>The economy\u2019s performance between July and September when lockdown restrictions were eased is better than most rating agencies and analysts anticipated.<\/li>\n<\/ul>\n<p><strong>Critic\u2019s view<\/strong>&#8211; India had introduced one of the strictest lockdowns in the world which has resulted in the sharpest output contractions and massive losses in terms of jobs and livelihoods.<\/p>\n<p><strong>Why GDP data should not be taken as sustainable recovery?<\/strong><\/p>\n<ol>\n<li><strong>The source of information is not reliable<\/strong>&#8211; Very little up-to-date primary information from farms, factories and offices is available for the estimation.<\/li>\n<li><strong>Pent up demand-<\/strong> The healthy recovery in the second quarter\u00a0represents meeting the pent-up demand after the \u2018Unlock\u2019 phase started in June.<\/li>\n<\/ol>\n<p>However, the quarterly figures do indicate the broad direction of change.<\/p>\n<ul>\n<li><strong>GDP in the manufacturing sector<\/strong>&#8211; It rose 0.6 percent in the September quarter, in a big sign of recovery compared with a crash of 39.3 percent in the April-June period.<\/li>\n<\/ul>\n<p><strong>What are the challenges for sustainable recovery?<\/strong><\/p>\n<ol>\n<li><strong>Weak aggregate demand- <\/strong><\/li>\n<\/ol>\n<ul>\n<li>Revenue shortfalls- The government\u2019s debt-GDP ratio has gone up though.<\/li>\n<li>Bank credit growth in the economy continues to decelerate.<\/li>\n<li>The cumulative growth of the index from April to October this year stood at negative 13% when compared to the same period last year.<\/li>\n<\/ul>\n<ol start=\"2\">\n<li><strong>Balance of payment surplus<\/strong>&#8211; the shortfall is on account of a sharp decline in investment demand, denting potential output.<\/li>\n<\/ol>\n<ul>\n<li>Both exports and imports have shrunk but imports have shrunk relatively more than exports, such a sharp fall in import demand does not augur well for a growing economy such as India.<\/li>\n<\/ul>\n<ol start=\"3\">\n<li>Rising foreign exchange reserves- India\u2019s flourishing foreign exchange reserves are made up of short-term debt flows; they are not our net export earnings.<\/li>\n<li><strong>Sudden booming stock market<\/strong>&#8211; This entirely driven by short-term foreign capital inflows.<\/li>\n<\/ol>\n<ul>\n<li>Such inflows are highly fickle, representing hot money, which can quit the financial markets in a jiffy if perceptions change for any exogenous reason.<\/li>\n<\/ul>\n<p><strong>Way forward-<\/strong><\/p>\n<ul>\n<li>As an additional expenditure on government consumption or investment or credit growth remain muted,\u00a0recovery is likely to remain modest.<\/li>\n<li>Economic recovery could still prove to be premature and illusory &#8211; Economists have reservations about reading too much into the September-October data as a sustainable trend.<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Context- The Q-2 sharp recovery is very tactical because of pent-up demand, because of lockdown and the Data used for quarterly growth rates are weak and questionable. What in the news- The second quarter GDP contracted at a slower pace of 7.5 percent compared to a massive 23.9 percent in the first quarter of the&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/gdp-recovery-questionable-data\/\">Continue reading <span class=\"screen-reader-text\">GDP recovery- questionable data<\/span><\/a><\/p>\n","protected":false},"author":61,"featured_media":71643,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,1351,1310],"tags":[1284,1530],"class_list":["post-71531","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-9-pm-daily-articles","category-daily-news","category-daily-news-updates","tag-eco_2","tag-gdp_national_income_updates","entry"],"jetpack_featured_media_url":"https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2020\/12\/Economic-recovery-post-covid.jpg?fit=1280%2C720&ssl=1","views":{"total":0,"cached_at":1700770418,"cached_date":1704855878},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/71531","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/61"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=71531"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/71531\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media\/71643"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=71531"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=71531"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=71531"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}