India’s economy grew at 8.7 per cent in 2021-22

India’s economy grew at 8.7 per cent in 2021-22

Context:

India’s economy grew at 8.7 percent in 2021-22 against the 6.6per cent contraction in 2020-21.At 4.1 per cent, the growth in the

January-March (Q4) of FY22 was the lowest among four quarters but higher on a yearly basis. According to NSO data, India‘s real GDP expanded to ₹147.36-lakh crore from ₹135.58-lakhcrore in 2020-21.The government said real GDP

(Gross Domestic Product) has recovered to cross the pre-pandemic level

Highlights:

The estimate rules out the risk of stagflation.

Stagflation:

• It is a seemingly contradictory condition described by slow economic growth and relatively high unemployment, or economic stagnation, which is at the same time accompanied by rising prices (i.e. inflation).
• Stagflation can also be alternatively defined as a period of inflation combined with a decline in gross domestic product (GDP).
• Typically, inflation rises when the economy is growing fast. That’s because people are earning more and more money and are capable of paying higher prices for the same quantity of goods.
• When the economy stalls, inflation tends to dip as well – again because there is less money now chasing the same quantity of goods.

When does stagflation occur?

• Stagflation is said to happen when an economy faces stagnant growth as well as persistently high inflation.
• That’s because with stalled economic growth, unemployment tends to rise and existing incomes do not rise fast enough and yet, people have to contend with rising inflation.
• So people find themselves pressurized from both sides as their purchasing power is reduced.

Listed global factors that can impact growth

• high prices of commodities
• significant import
• dependency such as crude and vegetable oils, fertilisers, and metals
• the tightening monetary
• policy across major economies
• supply chain bottlenecks
• delays and shortages of key inputs
• potential recessionary trends in some countries
• Gross domestic product (GDP) is the single standard indicator used across the globe to indicate the health of a nation’s economy: one single number that represents the monetary value of all the finished goods and services produced within a country’s borders in a specific period.
• India’s GDP is calculated with two different methods, one based on economic activity (at factor cost), and the second on expenditure (at market prices).
  • The factor cost method assesses the performance of eight different industries.
  • The expenditure-based method indicates how different areas of the economy are performing, such as trade, investments, and personal consumption.
• Further calculations are made to arrive at nominal GDP (using the current market price) and real GDP (inflation-adjusted). Among the four released numbers, the GDP at factor cost is the most commonly followed figure and reported in the media.
• The Central Statistics Office under the Ministry of Statistics and Program Implementation is responsible for macroeconomic data gathering and statistical record keeping.
  • Its processes involve conducting an annual survey of industries and compilation of various indexes such as the Industrial Production Index (IPI) and the Consumer Price Index (CPI).
  • The Central Statistics Office coordinates with various federal and state government agencies and departments to collect and compile the data required to calculate the GDP and other statistics.
  • Similarly, production-related data used for calculating IPI is sourced from the Industrial Statistics Unit of the Department of Industrial Policy and Promotion under the Ministry of Commerce and Industry.
  • All the required data points are collected and aggregated at the Central Statistics Office and used to arrive at GDP numbers.

The Factor Cost Figure

• The factor cost figure is calculated by collecting data for the net change in value for each sector during a particular time period.
• The following eight industry sectors are considered in this cost:
  • Agriculture, forestry, and fishing
  • Mining and quarrying
  • Manufacturing
  • Electricity, gas, water supply, and other utility services
  • Construction
  • Trade, hotels, transport, communication, and broadcasting
  • Financial, real estate, and professional services
  • Public administration, defense, and other services.

The Expenditure Figure

• The expenditure (at market prices) method involves summing the domestic expenditure on final goods and services across various streams during a particular time period.
• It includes consideration of expenses towards household consumption, net investments (i.e., capital formation), government costs, and net trade (exports minus imports).
• The GDP numbers from the two methods may not match precisely, but they are close. The expenditure approach offers good insight into which parts contribute most to the Indian economy.

• • Real GDP = Nominal GDP — Inflation Rate
• However, from the perspective of the common people, real GDP is what matters. The difference between the real and nominal GDP shows the levels of inflation in the year.

NSO

• The National Sample Survey Office (NSSO) merged with the Central Statistical Office (CSO) to form the National Statistical Office (NSO). On 23rd May 2019, the Government of India has approved the merger of NSSO and CSO.
• The National Sample Survey Office (NSSO), formerly called the National Sample Survey Organisation was the largest organization in India conducting periodic socio-economic surveys.
• Earlier known as the Central Statistics Organisation of India, CSO is responsible for the coordination of statistical activities in India, and evolving and maintaining statistical standards.
• NSO is headed by the Ministry of Statistics and Programme Implementation (MOSPI).