While world slumps, India's MODINOMICS leads to highest ever GDP quarterly expansion in its history.
News by Anubhav Singh from USA , Published by NRI Herald Australia: 14 september 2021
Last year had been the worst financial year for the COVID ravaged world. Many countries are still struggling with the never ending lockdowns. While the world still slumps into darkness a great news is coming from Asia's giant INDIA and modinomics is finally bearing its fruit which seems to have the capacity to bring the whole world out of this economic slump.
Last week India reported an historic GDP (gross domestic product) growth in the Q1 quarter 2022. GDP rose 20.1% in the three months in April-June quarter, compared with the same period a year earlier. This would be India’s fastest growth since the data started being released since 1990’s. Last year we saw a historic slump in activities when India imposed total lockdown across the country, restricting travel and business for months that led to the first recession in decades.
While the government expects GDP to grow at 11% in 2021-22, RBI’s guess is 9.5%. So when the growth was 1.6% in January to march, how did the economy reach a double digit super-growth in the next. Experts predict the reason for the jump is base effect. In the year 2019-20 April June quarter, GDP numbers was 35.7 lakh crore while in 2020-21, GDP numbers fell to 26.95 lakh crore due to the stringent lockdown.
Base-Effect: Analyst's hokum
Many analysts mentioned, the record GDP growth was due to base-effect but the same analysts forget to mention that many other countries had similar slump in April-june quarter of 2020. For instance, Canadian economy shrunk by 38.7% and USA by 32%.
But unfortunately, these countries did not see similar GDP growth in the same quarter 'this year'. US economy grew by meagre 6.5% while Canadian economy further shrunk by 1.1% in Q2 ‘2021. Base effect as suggested by analysts has no meaning on the basis of Apple to Apple comparison within same Quarterly timeframes and economic conditions worldwide.
Critics of Modinomics never gave the Narendra Modi government credit for a high base effect, when the growth numbers were tepid. By the same logic, how can these armchair, doomsday peddlers now discredit the solid 20.1 per cent GDP growth reported for the June 2021 quarter? The moot point is that with real GDP growth of 20.1 per cent in Q1FY22, more than 90% of the pre-pandemic output and private consumption stand recouped. On the supply side, recovery of pre-pandemic levels is most significant in the agriculture and allied sectors, which have reported a 108.2 per cent jump in Q1 of FY 22, than in Q1 of FY 21. The manufacturing sector is almost completely at pre-pandemic levels, having attained 96 per cent of pre-pandemic output.
While India was hit by the worst second wave between April-june and many states in India imposed stringent lockdown, USA and Canada were doing fine in this quarter. And the reason is the pandemic is still not over. Many sectors like tourism industry have still been impacted by the pandemic.
Recently we heard about the global chip shortage that has badly impacted the electronic sector. GM had to close its plants for 4 weeks due to chip shortage. Consumer confidence is still low as people are focusing on savings. Despite all these if India sees 20% growth its worth appreciating. At 'India Credit Spotlight 2021', S&P Economist (Asia Pacific) Vishrut Rana said, they expect strong economic growth going into calendar Q3 and Q4 as well in-spite of high inflation given third wave doesn’t hit India adversely.
“GDP at Constant (2011-12) Prices in Q1 of 2021-22 is estimated at Rs 32.38 lakh crore, as against Rs 26.95 lakh crore in Q1 of 2020-21, showing a growth of 20.1 per cent as compared to a contraction of 24.4 per cent in Q1 2020-21," said the statement released by India's Ministry of Statistics and Programme Implementation.
PMI (purchasing managers’ index) manufacturing also moved back up, following a temporary dip, coming in at 55.3 in July 2021. Indian Railways has achieved the highest-ever incremental freight loading of 17.54 million tonnes (MT) in July 2021, an increase of 18.43 per cent over July 2020, with total freight loading of 112.72 MT, as against the earlier best of 99.74 MT in July 2019 and 95.18 MT in July 2020. E-way bill generation picked up pace in July, indicating a gradual uptick in economic recovery. In the first 25 days of July, average daily e-way bill generation stood at 19.83 lakh, 8.8 per cent higher than the average for June and 54 per cent higher than the May level.
India's Vaccination drive
India has fully vaccinated 12% of the population and 39% of the population have been administered at least 1 dose. And there is planning to procure an additional 80 crore vaccines (800 million) between September and December wherein it will be able to vaccinate majority of its eligible population. Once India achieves that it should be able to export vaccines to developing countries as each vaccine maker claims to be able to manufacture 100 crore vaccines annually by December. Even though indicators remain below pre-pandemic levels and substantial slack still in the economy, government is putting all the efforts to get activities back to normalcy.
This is a new India which seems to be leading the world toward its brightest future in centuries.