Focus: GS-III Indian Economy
Why in news?
- World Bank expects India’s gross domestic product (GDP) to contract by 3.2% in 2020-21.
- There will be a moderate recovery to 3.1% growth in 2021-22.
- This means that 2021-22 GDP will be less than what it was in 2019-20.
Contraction in Growth is not Uniform
- It can be expected that at least two sectors; agriculture and government, will not see a contraction.
- In 2019-20, these two sectors had a share of almost 30% in total Gross Value Added (GVA), which implies that the economic downfall will be far more severe in the rest of the economy.
- The non-farm, non-government economy contains many sub-sectors. A contraction in each sub-sector will have different impact across states and jobs.
How to Use this knowledge that growth is not uniform?
- -Construction sector has less than 10% share in GVA in 2018-19, however, The Employment share according to Periodic Labour Force Survey (PLFS), was 12%.
- So, for an equal value of loss in output, job losses in construction would be far higher than in the financial sector.
- Bailing out the construction sector can save a lot of jobs, and mostly of the poor.
Elasticity of Output
- A useful way to measure job losses during a contraction is by using what is referred to as employment elasticity of output in economics.
- It is equal to the change in number of jobs per unit change in economic output.
- The concept captures the idea that for the same amount of growth, job creation varies across sectors.
- This also means that job losses during a contraction phase will vary across sectors.
Issues with tracking consumption trends
- There is a major blind spot for policymakers in tracking consumption trends.
- India does not have a consumption expenditure survey (CES) after 2011-12. This will be a decade-old in 2021-22.
- After the 2008 financial crisis, there was a lot of uncertainty about job losses. India did not have high-frequency employment data.
- Although, no the PLFS does collect employment data in each quarter of the year. However, the government has not been releasing the quarterly data regularly.
-Source: Hindustan Times