Sharp recovery on, expect GDP & GVA numbers to converge soon: Sanjeev Sanyal

Sanjeev Sanyal, the economist, author, and the principal economic adviser, government of India, has long maintained that India has followed a path different from most other countries and calibrated its measures that best suit the country. From the economic stimulus packages last year that moved from “a safety net to an investment and growth approach” to measures later to stimulate capital expenditure. It is therefore not surprising that he now sees the third quarter Gross Domestic Product (GDP) number, even at 0.4 per cent, as a clear signal of a sharp recovery process underway.

“I can clearly see a sharp recovery in the economy and a V-shaped recovery well underway,” he tells Financial Express Online. Ask him if it is really reflecting a V-shape, he says, “one is free to choose the letter of the alphabet to describe the recovery but there is no denying that it clearly looks like a sharp recovery.”

Economists who have been reading the data released by the National Statistical Office (NSO), Ministry of Statistics and Programme Implementation on the Second Advance Estimates of National Income, 2020-21 as well as the quarterly estimates of GDP for the quarter October-December (Q3), 2020-21, have been intrigued by the huge divergence between the GDP (Gross Domestic Product) of 0.4 per cent and the GVA (Gross Value Added) of minus 6.5 per cent (GVA defined as a measure of output and arrived at when the GDP number is adjusted for the impact of indirect taxes and subsidies).

On this, Sanyal says, “it is because of the statistical difference between the two numbers and those corrections have to happen because many subsidies, especially for food, had to be ramped up and the number is, therefore, a reflection of the calculation difference.” Though, he does point out that in normal circumstance, both the GDP and GVA numbers tend to move together but then “when you obviously have a major disruption as we had during the COVID lockdown, the difference between the two plays up. But they will converge very quickly,” he says.

On the GDP growth in 2020-21 in the light of the estimate of minus 8 percent, Sanyal reminds that what has been put out is not a forecast but a projection of the worst-case scenario and the actual statement says that “it will be limited to minus 8 percent, which means that it is the downside limit.” The real GDP at constant (2011-12) prices in the year 2020-21 is estimated to attain a level of ₹134.09 lakh crore, as against the first revised estimate of GDP for the year 2019-20 of ₹145.69 lakh crore, released on 29 January, 2021. The growth in GDP during 2020-21 is now estimated at minus 8.0 percent as compared to a positive 4.0 percent in 2019-20.