"Economic growth soared to a record high in April-June quarter due to a low base and a rebound in manufacturing and construction, as well as robust growth in agriculture, which has remained resilient throughout the pandemic," Times of India (TOI). "Data released by the National Statistical Office (NSO) ...showed GDP growth rose 20.1% in the three months to June, the first quarter of the 2021-22 fiscal year, compared with a record contraction of 24.4% in the year ago period." We must look beyond headline numbers to explain what is happening in the economy, explained Udit Misra. "Imagine the GDP was Rs 100 in the first quarter of 2019-20. Then it fell be 24% in 2020-21 to Rs 76. Now, if the GDP rises by 22% in the Q1 it would become Rs 93. But that is still Rs 7 short of the level where the economy was in 2019. Not to mention that two years lost in between." Except for the agriculture sector, gross value added (GVA) fell in all sectors in 2020-21. If the growth in GDP is higher than the growth in GVA it is due to higher government tax collections and not higher productivity. "Of the numbers released on Tuesday, private consumption expenditure was conspicuous in its flaccidity -- up 19.3% on-year, on a low base. Adjusting for that, and you get a decline of 8.9% on-quarter. Worse, at Rs18 lakh crore (Rs 18 trillion), its level is 12% lower versus the June 2019 quarter," Economic Times (ET). Fall in private consumption means that capacity utilisation of the manufacturing sector fell to 69.4 in the January-March quarter of 2021, Mint, which gives no reason for industry to invest in new projects. "Household financial savings in India averaged 13% of GDP for nearly a decade until fiscal 2015. Thereafter, this ratio gradually slipped to 11% in fiscal 2020", and has "dropped to a low of 8.2% of GDP in the December 2020 quarter, the latest period for which the RBI estimates this data". If people are surviving on savings they will not be inclined to spend. "Over 1.5 million people from both the formal and informal sectors lost their jobs in August," according to the Centre for Monitoring Indian Economy (CMIE), so that "the number of the employed fell from 399.38 million in July to 397.78 million in August, with nearly 1.3 million losses in rural India alone", Hindustan Times (HT). The national unemployment rate rose from 6.95% in July to 8.32% last month. "Data released by analytics firm IHS Markit showed the purchasing managers' index (PMI) for the manufacturing sector declined to 52.3 in August from 55.3 a month earlier but stayed above the 50-level, separating expansion in activity from contraction," HT. "The goods and services tax (GST) collection crossed Rs 1.12 lakh crore in August, a 29.6% year-on-year jump and the highest ever for the month since its launch five years ago, signalling robust recovery of business activities after the second wave of Covid-19 pandemic," HT. May not be because of increased business activities, but because of rising prices, as GST is collected as a percentage of the cost of goods and services. As explained by Misra this will be revealed if the growth in GDP is well in excess of the growth in GVA. The "GDP in real terms expanded by 20.1% in Q1 (April-June) while nominal GDP expanded by 31.7%, indicating substantial price rise," wrote Soumya Kanti Ghosh. This could explain why this is the highest August GST collection in 5 years, despite private consumption being 12% lower than in the April-June quarter of 2019. "Compared to Q1 2019-20, private final consumption expenditure (PFCE) and gross fixed capital formation (GFCF) (which is a proxy for new investments) are lower, and therefore below pre-Covid levels," Ghosh. The second wave of Covid was ferocious. "The more than 430,000 official deaths from Covid-19 are believed to be a serious undercount. The actual number of deaths may be as high as 3 million to 5 million," Vox. A strict lockdown was imposed on the nation on 25 March 2020, HT. The GDP had to grow this year in comparison because people strive to earn what they can. But the growth is sick. As people were.
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