[Editorial Analysis] Fleeting cheer

Mains Paper 3: Economy
Prelims level: Fiscal measures
Mains level: Indian economy growth and development


• The latest GDP estimates expectedly show that national output rebounded in Q1 of the current fiscal from the record contraction in April-June 2020, when the pandemic’s onset and the lockdown gutted the economy.

• National Statistical Office data show GDP expanded 20.1% from a year earlier, as every one of the eight industries spanning the broad agriculture, manufacturing and services categories posted positive growth.

• And gross value added, which aggregates output from all the eight sectors, grew by 18.8%.

• The high growth is because of the base effect since the Q1-2020 saw a contraction of 24%.

Condition of the economy:

• With the exceptions of electricity and other utility services and the non-contact intensive services grouping of financial, real estate and professional services, all other six industries posted double-digit quarter-on-quarter contractions.

• On the expenditures front, private consumption spending flattered to deceive, posting year-on-year growth of 19.3% but still shrinking by 17.4% from the preceding three months.

• And most disconcertingly, government consumption expenditure, which has invariably in the past helped shore up the economy, contracted 4.8% from a year earlier and 7.6% from the previous quarter.

Green shoots:

• Restrictions removed: Most States have gradually eased their localised second wave restrictions.

• Exports have been one of the bright spots as the U.S. and other western economies have ramped up economic recoveries that have underpinned demand for goods and services from India.

• Manufacturing has surged almost 50% year-on-year to be just under ₹24,000 crore short of the April-June 2019 output level. Manufacturing Purchasing Managers’ Index from IHS Markit, whose August release shows the sector experienced a second straight month of increase in production.


• With monsoon rains in deficit, agricultural output and wider rural consumption also face a likely downturn. Taking fiscal measures to ensure overall consumption demand does not weaken any further.


Prelims Questions:

Q.1) With reference to the floating solar PV project, consider the following statements:

1. The National Thermal Power Corporation (NTPC) Ltd has recently commissioned the largest floating solar PV project (of 25MW) in India on the reservoir of its Simhadri thermal station in Visakhapatnam, Andhra Pradesh.

2. It is the first solar project to be set up under the Flexibilisation Scheme, notified by the Government of India in 2018.

Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Answer: C

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