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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

February 2024