In the closing month of a year that saw global instability and insecurity with implications on major economic blocks and with fears now of an impending global recession next year, India’s Gross Domestic Product (GDP) numbers for the second quarter released on November 30th give reason for hope.
Speaking to Financial Express Online, economist and former governor of the Reserve Bank of India, Dr C Rangarajan felt the big positive news from the latest GDP numbers was that “we now seem to be on course for a 6.8 to 7 per cent rate of growth of the economy for the year as a whole.” He however seemed a bit concerned with the composition of the output and did not find it very encouraging at the moment, especially in some segments like in manufacturing for instance. Any scope to improve in this, he felt, would be crucial as it would have a direct implication on employment. Without better performance in manufacturing the pick up in employment may not be as strong as a 7 per cent rate of GDP growth might indicate, he felt.
The concerns on the output composition stem from manufacturing for Q2 showing a -4.3 per cent change over previous year. The biggest jump this time has come in the services sector with increase coming from the segment of trade, hotels, transport, communications and services relating to broadcasting at 14.7 per cent.
The overall numbers show that the real GDP or GDP at Constant (2011-12) Prices in Q2 2022-23 is estimated at ₹38.17 lakh crore, as against ₹35.89 lakh crore in Q2 2021-22, showing a growth of 6.3 per cent as compared to 8.4 per cent in Q2 2021-22.
What also cannot be missed is the GVA growth rate of 5.6 per cent this time. Since the difference between GVA and GDP is taxes and the subsidies, it is apparent that the good tax performance has helped pull up the GDP numbers this time.
While, according to Dr Rangarajan, the aggregate number is in line with the forecast by the Reserve Bank of India, the expected rate of growth of the economy for the year at close to 7 per cent was in the light of a bit subdued forecast of less than 5 per cent for the third and the fourth quarter.
There is also perhaps room for improvement in the component of public expenditure. “May be we will see more expenditure by the government in the next two quarters, which in fact could also improve the performance of the economy in third and the fourth quarters,” says Dr Rangarajan.