The CSO’s first advance estimates expect the economy to return to even keel after a stormy H1
It is a sign of the times that the prediction of a 7.7 per cent contraction in India’s real GDP for FY21, its worst economic performance in several decades, is seen as an acceptable growth number, signalling a reasonably quick recovery from Covid-19. In projecting this in its First Advance Estimates, the Central Statistics Office is suggesting that real GDP, which fell by a drastic 23.9 per cent in Q1 of FY21 and 7.5 per cent in Q2 will return to an almost even keel in Q3 and Q4 with just a 0.1 per cent dip compared to the same quarters last year. The CSO expects per capita income to take a 5.2 per cent knock for the year (from ₹1.51 lakh to ₹1.44 lakh) and private consumption to dip 6.6 per cent (₹91,440 in FY20 to ₹85,359 in FY21). If the estimates come good, this would not be such a bad outcome for a year where economic activity was at a standstill for one whole quarter and resumed in bits and pieces in the following one.
As some experts have pointed out, the First Advance Estimates of GDP carry limited utility for long-term policy decisions, as they are based on extrapolation of high-frequency indicators and listed company data, which may not represent large swathes of the informal economy. This challenge is made worse by Covid this year. But then, having these estimates to go by is certainly better than groping in the dark. One hopes that the upcoming Union Budget has specific and pragmatic measures to lift manufacturing, real estate and services, while fuelling productive government expenditure, as these hold the key to nurturing the nascent recovery.