By Sushim Banerjee
Quite expectedly, GDP contraction of 7.5% in Q2 of FY21 was in line with the movement of important indicators for the duration of the period. For H1 as a entire, even though the contraction is restricted to 15.7%, a handful of positives can be picked up:
1) fish production, outcome of steady rainfall
2) coal production, providing some relief to user segments, energy and steel plants albeit at a larger price tag
3) industrial automobile sales even even though in the adverse category point to a expanding demand from movement of goods and transportation sector which would take a handful of months extra to return to pre-Covid level
4) expanding private autos sales signal a demand push from the urge of owning person vehicles against public transport in the Covid situation
5) net tonne kilometres by railways has turned optimistic due to larger movement of goods, each critical and non-critical and
6) steady development in payment of LIC premium is indica- tive of a parsimonious property- hold behaviour.
It is excellent to see that though agriculture, forestry and fishing have maintained a uniform development price of 3.4% in each Q1 and Q2, the share of this sector in total GVA which was regularly coming down from 11.5%to11.2%inQ2oflast year, has considering the fact that moved up to 12.5% in the existing Q2.
It is also encouraging to observe that manufacturing sector has enhanced its share from 17.6% in Q2 of final year to 19.% in the existing Q2. The output index of manufacturing in September showed a marginal contraction, thereby taking the IIP into a optimistic corridor for the initially time in FY21. In totality, the share of the service sector in the economy has dropped from 59.2% in Q2 of final year to 56.6% in the existing Q2, though he share of market has correspondingly moved up from 29.5% to 31.1% in Q2 of FY21. The expanding share of market has, in turn, boosted the commodity sector, steel and cement in the current period. The labour intensive manufacturing sector, specially the MSME segment, is to create extra employment and earnings possibilities.
One key driver in a demand deficient economy is the private expenditure as properly as the government consumption expenditure.InQ1ofthe existing fiscal, it was only the government consumption expenditure that went up to extra than 18% share in GDP from 11.8% in Q1 of final year. This improve produced up the lowered share of private consumption that went down from 56.4% in Q1 of final year to 54.3% and also a serious drop in share of fixed capital formation. The steep fall in government consumption expenditure, from 18.1% in Q1 to 10.9% in Q2, pulled down the total share of consumption to 65.1% from 72.4% in Q1 and 69.5% in Q2 of final year.
One of the important weaknesses in GDP development in Indian economy is the restricted fiscal space offered for investment for creation of fixed assets. The concern for fiscal deficit crossing the secure limits of 3.5-4.5% of GDP to fuel inflation has usually been plaguing policy- makers. The options of FPI and FDI flows had been not sufficient to give the booster. The share of GFCF in GDP went up from 22.3% in Q1 to 29% in Q2 (at continuous rates) and to 25.7% from19.5% in Q1 at industry rates.
The level of public investment in the economy wants a major push to attain 35% of GDP in the minimum. This continues to be a tall job. It is argued that extra public investment in sectors like Infrastructure would only crowd in private investment that has been stagnating as a percentage of GDP in the final handful of years. The opening up of railways (DFC, private trains, and so on), the liberalised defence procurement and acquisition, the higher level of activities in shipping, afford- in a position housing and transportation of oil, gas and water (Jal Jivan Mission) supply abundant possibilities for the private sector to chip in and participate in infra investment.
(The author is Former DG, Institute for Steel Development and Growth. Views expressed are individual.Views expressed are individual)