India’s GDP growth accelerates to record 20.1% in Q1

India's gross domesticated product

(GDP) for the first quarter ended June 30, 2021 soared to record high of 20.1 per cent, data released by the government showed on Tuesday.

"GDP at Constant (2011-12) prices in Q1 of 2021-22 is estimated at Rs 32.38 lakh crore, as against Rs 26.95 lakh crore in Q1 of 2020-21, showing a growth of 20.1 per cent as compared to contraction of 24.4 per cent in Q1 2020-21," ministry of statistics and programme implementation said in an official press release.

The jump in GDP numbers is mainly due to a weak base last year and also a rebound in consumer spending during the quarter.

Indian economy witnessed a rebound in spite of the drag caused by the second and more severe wave of Covid-19 that forced the majority of states to reimpose localised lockdowns and stop mobility completely from late April to early June.

However, the impact of such state-wise lockdowns was not as severe as the nationwide lockdown that was imposed last year during the first wave.

This is the fastest quarterly growth witnessed by India since such data began to be released in mid-1990s.

Briefing the media after release of the numbers, chief economic advisor Krishnamurthy Subramanian said that India is poised for stronger growth from structural reforms, govt capex push and rapid vaccination.

"Our macroeconomic fundamentals, whether it's inflation, current account deficit, forex reserves, and all the others metrics clearly indicate that our fundamentals are very very strong," he said.

What is meant by 'low base effect'

One of the major reasons for this phenomenal jump in GDP is the low base effect. That means the base year or month with which the figure is being compared.

For quarterly or annual GDP data, comparison is always made with the same quarter last year or growth over last year's GDP.

Other indicators

Apart from the low base effect, there are other significant reasons too which suggest a recovery in the economy.

Many sectors like retail, auto sales, farm output, construction and exports have picked up since June.

Power demand rose by 0.1 per cent as compared to the previous week, while the labour participation rate inched up to 40.8 per cent from 40 per cent.

In addition, equity indices surged to record highs with the benchmark BSE sensex breaching the 57,000-mark for first time ever. In all, the 30-share index gained over 4,000 points in the month of August.

Centre's GST collection has also revived to over Rs 1 lakh crore in July, while the manufacturing index has also shown an uptick.

The International Monetary Fund (IMF) in its July edition of World Economic Outlook has projected India to grow at the fastest pace of 9.5 per cent during the year 2021.