Let's hope the CEA's tank does not overflow.

"Exactly a year back, we had predicted an imminent V-shaped recovery in GDP growth after its sharp decline," wrote Chief Economic Advisor (CEA) to the Government of India (GoI) Krishnamurthy Subramanian. "India's gross domestic product (GDP) grew at a record pace of 20.1 percent in the first quarter of FY22 (1 April 2021-30 June 2021), as per official data," India Today. "GDP at Constant (2011-12) Prices in Q1 of 2021-22 is estimated at Rs 32.38 lakh crore (Rs 32.38 trillion), as against Rs 26.95 lakh crore in Q1 of 2020-21, showing a growth of 20.1 percent as compared to a contraction of 24.4 percent in Q1 2020-21," said the statement released by Ministry of Statistics and Programme Implementation (MoSPI). "Critics of the government chose to look at the Quarter-on-Quarter (Q-o-Q) method -- which showed the economy contracted by 17% in Q1 this year as against Q4 (January, February and March) of the last financial year -- to claim that the economy was fast losing momentum," wrote Udit Misra. The government refused to accept that the economy was slowing sharply even as growth rate "fell sharply from over 8% in 2016-17 to just about 4% in 2019-20". Also the budget was brought forward by one month which meant that the finance minister did not have data for the full financial year to assess the state of the economy. Corporate tax rates were cut to help the supply side "when India was facing a rapidly worsening demand problem". According to MoSPI data, private consumption demand, the biggest driver of the economy is back to 2017-18 level. Data indicate a L-shaped recovery and not V-shaped, which means that the government must spend more to stimulate demand. "GDP in real terms expanded by 20.1% in Q1 while nominal GDP expanded by 31,7%, indicating substantial price rise," wrote Soumya Kanti Ghosh. The fall in demand is shown by private final consumption expenditure (PFCE). "PFCE of Q1 2021-22 in real terms is 88% of Q1 2019-20," which means that demand is below pre-Covid levels. "The IIP (Index of Industrial Production) index in the June 2021 quarter was lower than the June 2019 value, which means that industrial activity has not returned to pre-pandemic level" wrote Roshan Kishore. "A comparison of different components of the IIP for the June 2021 quarter with their corresponding values in the June 2019 quarter supports the argument around discretionary demand being weaker." Which means people are spending mainly on essentials. An analysis of 333 firms in the S&P BSE 500 index showed, "Seventy percent of the firms analyzed saw a rise in cash reserves," wrote Niti Kiran. "However, the growing cash reserves seem to have come at the cost of investments. Indian companies have been reluctant to invest for many years now." "For this set of firms, capex growth peaked in 2015-16 at 20%." Capex means 'capital expenditure', which means money used for upgrading physical assets, new projects and buying new equipment, Investopedia. Capex has been falling since 2015-16 and, "After a brief recovery in FY19, things have gone downhill again." "The growth rate of 20.1 percent was led by the people's 'private final consumption expenditure (PFCE)," wrote former Finance Minister P Chidambaram. "It was Rs 17,83,611 crore (Rs 17.83611 trillion) in Q1 and marked a sharp increase over the Rs 14,94,524 crore (Rs 14.94524 trillion) spent in Q1 of last year when the country was hit by the first wave of the virus." At the same time government expenditure "declined from Rs 4,42,618 crore in Q1 of last year to Rs 4,21,471 crore this year". The government should have borrowed and spent more,  Chidamabaram thinks. Finance Minister Nirmala Sitharaman announced a stimulus package in June worth around Rs 6.29 trillion, Economic Times (ET). "The direct stimulus in the package adds up to 0.5% of the GDP, insufficient to trigger new investments. None of her 'Atmanirbhar' packages so far will do much to address the key challenge that will define Narendra Modi's prime ministership in the long run: the jobs crisis," wrote Puja Mehra. Everyone is wrong, opines Subramanian. GDP does not measure the level of water in a tank but the rate of flow of water into it. Let's hope his tank does not overflow.