Reading Q1 GDP data
Date: 02 September 2021 Tags: Reports & IndicesIssue
The GDP data for the first quarter of the current financial year (2021-22) was released by the Ministry of Statistics and Programme Implementation (MoSPI).
Background
The GDP data makes up a major source of information to gauge the health of the economy, especially during the current pandemic.
Details
-
The data focuses on two set of aspects. The first aspect focuses on the total demand in the economy and the other on total supply.
-
The first aspect, the GDP, is the total monetary value of final goods and services produced in a country in a given period of time. In other words, it looks for total demand created in the country.
-
The second aspect, the Gross Value Added or GVA, looks at monetary value added in different productive sectors of the economy. In other words, it looks at total supply.
-
The GDP is calculated by taking GVA and adding all taxes imposed by the government and subtracting subsidies given by the government.
Thus,
GDP = (GVA) + (Taxes earned by the government) — (Subsidies provided by the government)
-
The difference between the value of GVA and GDP will provide a sense of the role the government played.
-
If government earned more taxes than the total amount given as subsidies, GDP will be higher than GVA.
-
If the government spent more on subsidies than the revenues earned from taxes, absolute level of GVA would be higher than the absolute level of GDP.
The latest data
-
GDP of India grew by 20.1% in the current quarter Q1. GVA during the same period grew by 18.1% Year on Year.
-
This means that total output created by the economy during the period was 20.1% more than the output of the economy in the same time last year.
The V-shaped recovery
The growth seen in India is a reflection of low base effect and not absolutely v-shaped recovery. In the v-shaped recovery, the absolute GDP of an economy gets back to the level before the crisis.
Components of GDP
GDP = C + I + G + NX
-
Consumption (C) demand from private individuals (56% of GDP)
-
Investment (I) demand generated by private sector businesses (32% of GDP)
-
Demand for goods and services generated by the government (G) (11% of GDP).
-
Demand created by “Net Exports” (NX)