GDP data should not mask the struggle in sections of the economy

A report in Times of India from Chennai says that 15% of the licensed restaurants in the city have shut down in the wake of the pandemic. According to the local chapter of the industry association, it has had a direct impact on at least 1.5 lakh jobs, in a sector where 75% of the workforce is from outside the state.

Separately, another media report pointed out that there was a drop in income tax returns filed of salaried tax payers for the year 2019-20, a period in which the economy grew 4%.

These economic indicators highlight the need for caution in interpreting GDP data. In the third quarter (October-December), the economy grew 0.4% year-on-year. There is understandable relief after the contraction of the first two quarters. But it is premature to talk of a ‘V’ shaped recovery.

Also read: Chennai and suburbs lose 1,500 eateries to pandemic

The GDP data takes almost three years to finalize as the first few announcements of the numbers depends a lot on proxy indicators. In a period when the economy is subjected to a severe shock, like the lockdown, there is a strong possibility the first cut of GDP data overstates the economic performance. Keeping that in mind, it is important for the Centre to be alive to the possibility that the economy may need more hand holding in the days to come.



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