Record high GDP at 20.1% in April-June, is the economy mending or is it a numerical illusion?

Record high GDP growth at 20.1% for the April-June Quarter, the big jump due to a very low base last year which was paralysed by the pandemic forcing a national lockdown.

The Good News

GDP Q1 of 2021-22 is at ₹ 32.38 lakh crore, as per govt data which is showing stability as it claws back to the pre-pandemic levels. Agriculture clocked in a 4.5% growth which is much higher than the 3% growth that economists were pricing in. The second wave did not deter the construction sector either that has seen a 68% jump on year-on-year basis.

The Grim Reality

On an absolute basis the economic activity is still not close to the 'normal' year levels of 2019. Except for Electricity & Utility, the other 7 industry groups still remain way below their reported economic value from 2019.

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The Road Ahead

As the RBI stated in their State of Economy is July the reading from the GDP is clear. The central bank had warned, " A solid increase in aggregate demand is yet to take shape...there will be substantial slack in the economy and demand pressures may take some more time to become evident.” Signals are clear that building and spending, the main blocks of the economy as cementing back into shape but it will be long road to full recovery.