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Provisional Estimates of Annual National Income – 2021-22

Posted on June 1, 2022 by admin1  1365

In News

  • Recently, the National Statistical Office (NSO), Ministry of Statistics and Programme Implementation released the Provisional Estimates of National Income 2021-22 as well as Quarterly Estimates of GDP (Q4) 2021-22.

Major Highlights

  • The growth in GDP during 2021-22 is estimated at 8.7 percent as compared to a contraction of 6.6 percent in 2020-21.
  • Nominal GDP or GDP at Current Prices in the year 2021-22 is showing a growth rate of 19.5 percent.
  • GDP at Constant (2011-12) Prices in Q4 2021-22 is showing a growth of 4.1 percent.
  • The total tax revenue used for GDP compilation includes non-GST as well as GST revenue.
  • The Gross Value Added (or GVA) grew by 8.1% in FY22. 
    • In FY21, GVA had contracted by 4.8%.

Image : Courtesy :TH

How are GDP and GVA different?

  • The GDP calculates national income by adding up all expenditures in the economy, the GVA calculates the national income from the supply side by looking at the value added in each sector of the economy.
  • The two measures of national income are linked as follows:
    • GDP = GVA + Taxes earned by the government — Subsidies provided by the government
  • As such, if the government earned more from taxes than it spent on subsidies, GDP will be higher than GVA.
    •  If, on the other hand, if the government provided subsidies in excess of its tax revenues, the absolute level of GVA would be higher than that of GDP.
  • Simply put, GDP provides the demand side of the economy, and GVA the supply side.
  • The GVA is considered to be a more realistic proxy to measure expansion of economic activity.

Provisional Estimates of National Income

  • Benchmark indicator method: The Advance and Provisional Estimates of National Income are compiled using the benchmark indicator method.
    • It means the estimates available for the previous year referred to as the benchmark year are extrapolated using the relevant indicators reflecting the performance of sectors.
  • The sector-wise estimates have been compiled using indicators like:
    • Index of Industrial Production (IIP)
    • Financial performance of Listed Companies in the Private Corporate Sector based on available quarterly financial results for these companies
    • Third Advance Estimates of crop production
    • Production of major livestock products
    • Fish Production
    • Production/consumption of Cement and Steel
    • Net Tonne Kilometres and Passenger Kilometres for Railways
    • Passenger and Cargo traffic handled by Civil Aviation
    • Cargo traffic handled at Major Sea Ports
    • Sales of Commercial Vehicles
    • Bank Deposits & Credits
    • Accounts of Central & State Governments available for the financial year.

Major challenges hampering the growth

  • A proximate reason for this relatively slower pace of growth could be the spread of the Omicron-wave of the COVID-19 pandemic that locked down large parts of the economy.
  • The biggest problem seems to be manufacturing: where gross value added (GVA) has contracted 0.2 percent.
  • Expansion in the construction sector has also appeared to have slowed down considerably, crawling at 2 percent.
    • The Omicron lockdown may have brought construction activity to a screeching halt, the results of which seem to be showing up in the national income numbers.
  • Private final consumption expenditure (PFCE), a metric to gauge household spending, too appears to have slowed down sharply.
  • The sharp rise in inflation levels, besides subdued household expectations about income growth, could be driving lower consumer confidence, and hammering down sales of products and services.
    • This slowdown comes at a time when people are battling with persistently high cost of living with growing prices of both essentials and aspirationals.
  • A mix of high input costs, falling supplies, and costly imports walloped by a weakening falling rupee has made getting by get harder.

Way forward

  • Improved data coverage, actual tax collections and expenditure incurred on subsidies, data revisions made by source agencies etc. would have a bearing on subsequent revisions of these estimates.
  • Road and other infrastructure projects can spur economic activity, boost construction, and create jobs: The segment accounts for about 10 percent of the GDP, and is the largest creator of direct and indirect employment, employing about 50 million people.
    • It has a strong multiplier effect with major forward linkages to sectors such as real estate, infrastructure and manufacturing, and backward linkages to steel and cement among others.
  • A lot will depend on the monsoon rains, and its spatial distribution: It has already hit Kerala, the first port of call in India’s mainland, three days in advance, raising hopes of plentiful rains, which are critical to keep food prices down, and raise rural incomes.
    • The monsoon is critical to replenish 81 reservoirs necessary for power generation, irrigation, and drinking.

Source:PIB

 
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