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FY22 GDP growth put at 9.2% as agri, manufacturing shine

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January 08, 2022

Why in news?

The National Statistical Office has released the first Advance Estimate for FY22.

What the estimate tells us?

  • Considering limited impact of the Covid wave the economic growth for the 2021-22 fiscal year is estimated at 9.2%.

  • Though growth points to 9.2% due to base effect the real growth estimated is only 1.3% over the pre-Covid GDP level.

  • The size of India’s economy is expected to increase to $3.2 trillion.

  • Nominal GDP is estimated to expand by 17.6% in FY22, higher than the 14.4% assumed in Budget 2021-22.

  • The estimate is the highest in nearly two decades.

  • Nominal growth is overtaking real growth by 8.4 percentage points due to a high implicit price deflator (IPD)-based inflation of 7.7%.

What are the sector wise data?

  • The agriculture sector continues to shine. 

  • Manufacturing and construction have shown good growth.

  • The growth in agriculture and industry was higher than in 2019-20 (FY20). 

  • Though the services sector grew it lags behind FY20.

What are the concerns?

  • Impact of subsequent covid waves on the revival of economy in 2022-23.

  • Continued supply-side rigidities.

  • Lowering of India’s export due to covid surge.

What looks promising?

  • Higher nominal GDP than assumed provides additional expenditure space for the government.

  • This would reduce the debt-to-GDP ratio, which is the focus of FRBM.

  • Despite the shortfall in disinvestment proceeds and additional demand for supplementary grants, the fiscal deficit target of 6.8% of GDP is likely to be achieved.

How is Nominal GDP different from Real GDP?

  • Nominal GDP tells us the present-day value of a country’s goods and services. Here prices are affected by inflation since it uses current market prices.

  • Real GDP is not affected by inflation. Here nominal GDP is adjusted for inflation using GDP deflator to reflect changes in real output.

  • Hence real GDP growth reflects a country’s increased output and is not influenced by inflation increasing price level.

  • The GDP deflator, also called implicit price deflator, is a measure of inflation.

  • It is the ratio of the value of goods and services an economy produces in a particular year at current prices to that of prices that prevailed during the base year.

 

Reference

  1. https://www.thehindubusinessline.com/economy/fy22-gdp-growth-put-at-92-as-agri-manufacturing-shine/article38178306.ece?homepage=true

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