GDP components show that private consumption is weak and needs fiscal support



India’s GDP in 2021-22 grew by 8.7% to register Rs 147.35 lakh crore. After a contraction of 6.6% in 2020-21, the latest GDP figure indicates that the impact of the Covid-19 outbreak and subsequent national lockdown has been overcome. However, a more detailed examination of the components of GDP suggests that the overall recovery from the pre-pandemic period is weak, and as far as private consumption is concerned, the situation is not good.

In absolute terms, private consumption in 2021-22 was Rs 83.77 lakh crore, up 1.4% from the pre-pandemic year of 2019-20. However, seen in terms of private consumption per capita, the message is different. Private consumption per capita in 2021-22 was 61,215 rupees, lower than the 61,594 rupees recorded in 2019-20. In other words, private consumption today per capita has yet to catch up with the pre-pandemic period.


The Indian economy is entering a difficult phase. GDP in the January-March quarter grew by 4.1% to Rs 40.78 lakh crore. Economic performance was dragged down by the Omicron wave during the quarter. Since then, the conflict between Russia and Ukraine has worsened the environment and driven up commodity prices.

Given an upward trend in inflation and still weak demand, fiscal policy will have to play the main role of supporting the economy. The Indian government and states need to recalibrate their fiscal stance as inflation-adjusted private consumption is weak, but tax collections will exceed expectations as nominal GDP grew by 19.5% in 2021-22 and this momentum will be maintained for some time.

Also Read: Indian Economy Grows 8.7% in FY22; Q4 GDP at 4.1%




You Can Read Also

World News



Leave a Reply

Your email address will not be published.