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GVA growth more accurate than GDP numbers for FY21: DEA
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SME Times News Bureau | 05 Mar, 2021
The Department of Economic Affairs (DEA) of the Finance Ministry has
said that following the growth of Gross Value Added (GVA) for FY21 would
be more appropriate rather than tracking the GDP growth (contraction)
which has been "distorted" for the current financial year.
The
Monthly Economic Review for February released by the DEA noted that the
food and fertiliser subsidy from the budget estimate (BE) to the revised
estimate (RE) of 2020-21 increased by Rs 3.7 lakh crore. After making
adjustments for pre-payment of loans of Rs 2 lakh crore taken for paying
subsidy of previous years, the balance Rs 1.7 lakh crore emerged as the
additional subsidy paid in the pandemic year.
This enhancement
of gap between BE and RE caused the growth of subsidies to be
significantly higher than the growth of indirect taxes, it said.
Consequently,
the report noted that GVA growth became higher or in other words GVA
contraction became smaller than that of the GDP.
In FY 2021-22,
the annual growth of subsidy estimated over the unusually large base of
the previous year will again become lower than the growth of indirect
taxes.
"Real GDP growth will then exceed real GVA growth in FY
2021-22. Since GDP growth (or contraction) has been distorted in FY
2020-21 on account of significant growth of subsidies, GVA growth is a
more appropriate measure to follow in the current year," the report
said.
The second advance estimates of National Income for FY
2020-21 recently released by the NSO indicate real GDP contraction at 8
per cent, larger than real GVA contraction of 6.5 per cent. This is not a
normal occurrence.
Real GDP growth has been higher than real GVA
growth since 2011-12 when estimation of National Income in India moved
to a new base year. GDP is GVA plus indirect taxes net of subsidies, and
GDP growth is higher than GVA growth when growth of indirect taxes is
higher than growth of subsidies.
The annual growth of indirect
taxes between 2012-13 and 2019-20 has been higher than the annual growth
of subsidies. The year 2019-20 is an exception as the data is yet to
reach the finalisation stage, it noted.
Talking of the economic
recovery, it noted that the recovery of global output has slowed
following re-imposition of lockdowns in the advanced countries amid
renewed Covid-19 waves and its emerging variants.
However,
economic activity in India has gathered pace with mild stiffening of the
Covid-19 curve failing to deter a steady uptick in consumer sentiment,
which has been bolstered by the inoculation drive.
"Positive GDP
growth in Q3 of FY21 for the first time since the onset of the pandemic
adds to the positive sentiment as the economy is set to close the year
with activity levels higher than measured in the second advance
estimates of GDP," it said.
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Customs Exchange Rates |
Currency |
Import |
Export |
US Dollar
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66.20
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64.50 |
UK Pound
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87.50
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84.65 |
Euro
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78.25
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75.65 |
Japanese
Yen |
58.85 |
56.85 |
As on 13 Aug, 2022 |
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