Indian Economy Out of Recession- 0.4% Growth in Q3

Indian Economy Out of Recession- 0.4% Growth in Q3











India’s gross domestic product (GDP) grew at 0.4% on a year-on-year basis in the quarter ending December 2020, according to data released by the National Statistical Office (NSO) on February 26. The nation's Gross Domestic Product (GDP) saw revival as economic activities resumed after a long and arduous lockdown and overall sentiment improved with the rollout of vaccination drive. The Growth observed after two consecutive quarter of contraction in GDP.

recession is when the economy contracts for at least two quarters. 

The second advance estimate and the third quarter estimate of GDP released by the Ministry of Statistics and Program Implementation (MOSPI) are on expected lines.  The estimate of 1% growth in GVA and 0.4% growth in GDP marks the ending of the recessionary phase.  In fact, all the sectors except (i) Mining and Quarrying, (ii) Trade, Hotels, Transport and communication services and (iii) Public administration, defense and other services have recorded growth in the third quarter.

 




















What Is GDP and GVA?

GDP or Gross Domestic Product is the total value of goods and services produced by a country.

GDP = C+I+G (Consumption+ Investment+ Government Expenditures)

GVA (Gross Value Added): GVA shows the production contribution of a sector. It shows the values towards the supply chain. 

When GVA from all sectors are added together and necessary adjustment for taxes and subsidies are made, we will get the GDP for the economy.

 Indian GDP Data:

Q3 GDP expands at 0.4% vs 3.3% YoY.

Q3 GVA growth at 1% vs 3.4% YoY.






Alpha Eye Thoughts:

The Economic Growth is still not as significant as we predicted:

Cause:

  • 1.     Private consumption declined.
  • 2.     Government expenditure increased in pandemic.
  • 3.     Private investment and FDI declined.









Consumption declines due to job loss, fear of job loss, and loss of business. The Indian economy is a consumption base economy where consumption contributes 57% of the total economy.

Government expenditure has increased from 10.6% to 11.8% due to various COVID relief schemes.

Private investment also declined from 32.5% to 30.9%. The main reason is fear of loss again. Private investors move to safer investments such as gold in case of an epidemic. Apart from this, India's foreign direct investment from China is also prohibited due to the China border dispute.

However, the collection of GSTs increased considerably. The growth in GDP is still not so much as we can compare it with some economies. We have examples of Vietnam and China, which have been registering growth in a good economy after getting out of recession. The main reason for this is the reduced purchasing power of the people


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