Tamanna Inamdar: Some are saying 20.1% GDP growth is good, some are calling it great and some are saying it’s really nothing much. What is your take?
Pronab Sen: At the end of the day, what matters is how much income people in the country have. Essentially, what the current numbers are saying is that in the first quarter of this year Indians as a whole have got much less income than they had in 2019. Do you take that as good news or bad news?
Off-hand it looks like bad news, but compared to last year it looks a lot better. But the simple fact of the matter is we have not even gone back to base zero, which is 2019-20.
How long before we reach at least pre-pandemic levels? Would you say that we are moving closer towards the pre-pandemic kind of situation?
This is difficult to say. Nobody can deny that the government has a huge role to play in terms of the recovery process. Now, those numbers are starting to look a little worrying, because GDP has grown by 20.1% but the production side — the value of goods and services produced — that has grown at only 18%. That is actually pretty low.
The remaining two percentage points that we are talking about have essentially come because net indirect taxes — the government’s indirect taxes minus the subsidy it pays — have gone up significantly. And this is compared to 2019, mind you.
Now, what we had expected is that during the course of the pandemic the government would actually step up expenditures. It has stepped up expenditures but not to the extent that was permitted by the tax collections. That is something worrying.
These figures are being supported by the data that has been put out by the Controller General of Accounts. There we find to our horror that in the first quarter government taxes have gone up by Rs 2 lakh crore compared to 2019, but expenditures have gone up by only Rs 0.5 lakh crore.
If the government is not going to support economic growth, then I am afraid we will only limp back. That’s because you are then depending entirely on what the private sector will do. And the data from today’s release reinforces that view that both private consumption and private investments are weak.
So, we should not expect any dramatic change to happen unless the government steps up to the plate. So far it does not seem to have shown any inclination to do so.
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