capex to surpass pre-pandemic numbers; Household spending, consumption reduction – World Affairs SRS

capex to surpass pre-pandemic numbers; Household spending, consumption reduction

– World Affairs SRS

According to the first advance estimates of national income released by the National Statistical Office (NSO) on Friday, government consumption expenditure and overall investment for FY 2021-22 (FY22) are projected to cross the pre-pandemic levels of FY20. However, household spending and consumption have still not reached that level.

In absolute inflation-adjusted terms, the real gross fixed capital formation (GFCF) is estimated at Rs 48.5 trillion for FY 2012, as against provisional estimates (PE) of Rs 42.2 trillion in FY 2011 and Rs 47.3 trillion in FY 2010. Huh. The government’s final consumption expenditure (GFCE) is expected to come in at Rs 17.1 lakh crore in FY12, while the PE stood at Rs 15.9 lakh crore in FY11 and Rs 15.4 lakh crore in FY10.

However, private final consumption expenditure (PFCE), a proxy for household spending and consumption, is projected to be Rs 80.8 trillion for FY 2012, compared to Rs 75.6 trillion for FY 2011 and Rs 83.2 crore for FY 2010. Is.

This indicates that despite a strong recovery from the previous fiscal’s contraction in FY22, consumption recovery has not been broad-based.

In percentage terms, for which nominal Gross Domestic Product (GDP) is considered instead of Real GDP, the share of PFCE is estimated to be 57.5 per cent in FY12, as compared to 58.6 per cent in FY11 and FY12. In 2010 it was 60.5 percent. The share of GFCE is estimated at 12.2 per cent of real GDP for FY22, as against 12.5 per cent in FY21 and 11.2 per cent in FY20. This shows that the capital and revenue expenditure of the government has accelerated economic activity since the outbreak of the pandemic.

“It basically reflects the role of fiscal policy in reviving growth. Through a combination of fiscal devolution and real spending, the government is taking a more active role, said Rahul Bajoria, India’s chief economist at Barclays.

The contribution of GFCF to GDP is estimated to be 29.6 per cent in FY 2012, as compared to 27.1 per cent in FY 2011 and 28.8 per cent in FY 2010.

Analysts said with sluggish private investment and states focusing on welfare schemes instead of capital expenditure, the estimate for FY22 could turn out to be unfounded.

“The fact that private consumption is still relatively weak is probably an indication that there is still some lull in labor markets,” Bajoria said.

State Bank of India Chief Economic Adviser Soumya Kanti Ghosh said private and government consumption expenditure is likely to see higher growth, mainly due to the lower base of the previous year.

“Even investment demand, which took the biggest hit with double-digit contraction last year, is expected to see a strong growth of 15 per cent. However, the increase in inventory implies that demand still has to pick up meaningfully. Even imports have grown more than exports, which means more domestic absorption and investment demand,” Ghosh said.

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