The NSO’s estimates of GDP for the first quarter (April-June) 2022-23 were released last Wednesday. The number that is prominent is the growth rate of 13.5 per cent. In terms of Gross Value Addition (GVA), the number is 12.7 per cent. Given that the estimates of rating agencies, banks and the RBI ranged from 13 per cent to 16.2 per cent (RBI), any number falling within that range would, I suppose, be enough to gloat!
However, there is a large world beyond statistics. This essay is about what the NSO numbers mean to millions of people who live in the real world and who will be happy and who will be unhappy.
Numbers That Matter
I have constructed a Table (see box) containing the corresponding figures for 2019-20 and 2021-22 and added the numbers for the first quarter of 2022-23. Since 2020-21 was the pandemic-hit year that witnessed prolonged lockdowns, I have not included that year’s numbers in the Table. I may point out that 2019-20 was a normal year. 2021-22 was the year touted as the recovery-year. 2022-23 is the year in which one hoped there will be a full-fledged recovery. So, the focus should be on the numbers for 2019-20, 2021-22 and 2022-23.
Further, the numbers must be viewed from the point of the people who will be affected by the performance of the sector concerned. For example, ‘Agriculture, Forestry & Fishing’ affects the lives of a majority of families in the country. ‘Mining & Quarrying’ and ‘Construction’ are important because the two sectors employ the largest number of workers who have low skills and little school education. ‘Financial, Real Estate & Professional Services’ is important because it employs the educated and skilled white-collar employees.
The bench mark year is 2019-20. A country that is growing must grow at a brisk rate over and above the previous year and the bench mark year.
It is evident from the GVA figures that while the economy did recover in 2021-22 over the abysmal performance in the pandemic year (2020-21), sectoral growth did not reach the level of output in the normal year, 2019-20 — except in agriculture.
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Therein lies a poignant lesson: pandemic or no pandemic, farmers and farm labour have no choice but to toil in their fields to earn for their survival. They do not have the luxury of Work-From-Home! (The marginal increase in ‘Financial etc.’ was statistically insignificant.)
Not Out of Woods
Therefore, the growth that we must look for in 2022-23 is not the growth over 2021-22, but the growth over 2019-20. The last two rows of the Table highlight the difference. While the growth in Q1 of 2022-23 is impressive when compared to Q1 of the previous year (2021-22), it is worrying when compared to Q1 of the bench mark year (2019-20). ‘Agriculture etc.’ seems to have retained its spirit. The pick-up in ‘Financial, Real Estate etc.’ is encouraging. But the other three sectors in the Table tell the story of an economy that is not yet out of the woods.
I had not put ‘Manufacturing’ in the Table because I did not want those numbers lost in a forest of numbers. The value addition in ‘Manufacturing’ in Q1 of the three relevant years were: Rs 565,526, 577,249 and 605,104 crore. In terms of growth, Q1 of 2022-23 recorded a growth of 7 per cent over 2019-20 and 4.8 per cent over 2021-22. My conclusion is that manufacturing growth is still sluggish because of inadequate new investment or low demand or both. Intuitively, I conclude that the MSME sector is still in the doldrums.
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The crucial question is what are the implications for the future, especially for employment. The status of farmers and farm labour will remain the same and there will be little movement to non-farm jobs. Since ‘Mining etc.’ and ‘Construction’ are only slightly better than in 2019-20, unless there is a strong revival, unemployment among unskilled and low-skilled workers will be high. The steps taken by the government to boost manufacturing are apparently insufficient and have failed to revive the MSME sector. The opportunities for skilled, white collar workers are growing but a major part of the Services sector (‘Trade, Hotels etc.’) is yet to revive, thereby dampening job opportunities. (Note: the unemployment rate in August rose to 8.3 per cent.)
The RBI had estimated the quarter-wise growth in 2022-23 as 16.2, 6.2, 4.1 and 4.0 per cent. Note that it is a declining graph. We have started the first quarter with 13.5 per cent — lower than RBI’s estimate. What does this slow start foretell about the remaining three quarters?