Daily News Analysis

First GDP Advance

10th January, 2022 Economy

Figure 3: No Copyright Infringement Intended

Context:

  • The National Statistical Office (NSO) released the First Advance Estimates (FAE) for the current financial year (2021-22 or FY22). 

 

What is your first GDP forecast?

  • First introduced in 2016-17, usually released at the end of the first week of January.
  • These are the "first" official estimates of how GDP is expected to grow this year.
  • However, it is also a "provisional value" because it was announced long before the fiscal year end (April to March).
  • FAE will be released shortly after the end of the third quarter (October, November, December).
  • It does not include formal third quarter GDP data released as part of the Second Preliminary Estimate (SAE) in late February.

Methodology:

  • FAE is derived by extrapolating the available data.
  • From a budgetary perspective, it's important to note what happened to nominal GDP-both absolute levels and their growth rate.
  • Real GDP, or GDP after deducting the effects of inflation, is the key figure derived.
  • All Budget calculations start with the nominal GDP. Real GDP = Nominal GDP — Inflation Rate The difference between the real and nominal GDP shows the levels of inflation in the year.

Findings:

  • GDP Growth: India's Gross Domestic Product (GDP) is expected to grow 9.2% this fiscal year after shrinking 7.3% in the previous fiscal year.
  • It is underpinned by increased production in agriculture, mining and manufacturing.
  • “Mining and quarrying (14.3%)” and “Commercial, hotel, transportation, telecommunications and broadcasting related services” (11.9%) recorded significant increases.
  • After that, the manufacturing industry will increase by 12.5%. The growth rate for the past 12 months is estimated to be 3.9% in the agricultural sector in 2010, which is higher than the growth of 3.6% in the previous fiscal year.
  • Low consumer spending: Demand for consumer spending remains low, and investment in the economy and government spending are expected to improve.
  • Private consumption typically accounts for more than 55% of total GDP. Levels are expected to remain widely maintained at the 2019-20 level.
  • Such weak private demand will make it difficult to sustain economic growth in the coming months and years.

 

Extra information-

Gross domestic product:

●       This is the monetary value of all manufactured goods and services produced in the country during a particular period.

●       It provides an economic snapshot of a country used to estimate the size of an economy and its growth rate.

●       It can be calculated in three ways using spending, output, or income, and can be adjusted around inflation and population size to gain deeper insights.

 

Gross Value Added:

●       It is the value of production minus intermediate consumption and is a measure of the contribution of an individual manufacturer, branch, or sector to growth.

●       It gives a rupee value for the number of goods and services produced in the economy, after deducting the costs of the inputs and raw materials used to produce those goods and services.