 You're watching News Made Easy and I'm on Indi Chakravarti. India's economy is in a bad shape. It's in trouble, right? And it's going to take a very, very long time to go back to the trend path of growth that we had. To go back to the growth path that we had of about 6-7 odd percent. And why am I saying that? On the face of it, the June quarter data that we're seeing here, real GDP growth of more than 20 percent in April to June 2021. Nominal GDP growth of more than nearly 32 percent. That looks like a great recovery, right? First, let's just get this out of the way. Real GDP, which is what is normally quoted, which is what is normally discussed by economists and the pundits. Real GDP is the actual number of goods and services available to you and me in the economy. That is what we call real GDP that has been produced. When we talk about nominal GDP, we say, okay, these are the goods and services in the market. How much will we have to pay in today's prices to buy them? That is nominal GDP in today's prices. Obviously, you know that you can have zero real GDP growth, right? But high nominal GDP growth, if prices rise, it's as simple as that, right? To explain that, let me take the example of any person who had a salary of 50,000 rupees in year one. And in year two, that rose to 55,000 rupees. What is the raise? They've got 10 percent. Now, in year one, let's say that they bought a set of goods and services, which cost them 50,000 rupees. They bought exactly the same set of goods and services in year two. Inflation was 10 percent. Average inflation was 10 percent, which means that whatever you could buy for 50,000 rupees in year one costs 55,000 rupees in year two. So the raise that he got of 10 percent, the person got of 10 percent is exactly taken away by the inflation of 10 percent. So on the face of it, there is a 10 percent raise, but real raise is 0 percent. There's been no real raise. So we need to know both of these to know that what is happening to the real economy as well as what is happening to the way in which prices are moving. So both of these numbers are published. So I'm going to take a look at per capita GDP because it's okay to say, all right, our GDP is growing. But if the population is growing at a faster pace, then obviously per capita per person GDP is not growing fast enough. So let's first look at nominal GDP. Nominal GDP versus what happened to nominal GDP. If you look at it, nominal GDP right now per capita, nominal GDP in the June quarter was close to 37,800 rupees. I've rounded off the numbers because in any case it's a spurious accuracy that we talk about. Both are surveys, whether it's the population estimate or the GDP estimate. So I'm saying 37,800 rupees was the per capita nominal GDP or in today's market prices of our country. Now imagine that this growth had taken place at the same rate as it had between 2011 and 2019. The reason I'm saying that is because between 2011 to 2019, we had a nominal GDP growth of almost 0.1% every year. This is pre-COVID. Every year our nominal GDP per capita nominal GDP per person GDP in market prices that prevailed in each year. When we compare that it was growing at 10.1%. Similarly, if we take that and say ok, that's the trend that should be the normal trend. Where would we have reached in terms of nominal again today's market prices per capita GDP? 45,800 rupees in this quarter, the April to June quarter. Now look at that gap, we're still 18% away from that path. That standard trend path that was taking place of per capita nominal GDP growth, 18% away. We have not recovered, we have not come close to recovery. Alright, let's look at real GDP. What is happening here? The same thing. I'm going to take real GDP of each year divided by the population of each of those quarters in each year and divided by the population of India of that period and let's see what happens. Right now our real GDP per person is approximately 24,000 rupees. If the trend and the trend was, the trend that we saw was effectively approximately about 5.3% is the real GDP growth in the June quarter compared to the previous June quarter on an average between 2012 to 2019, 2011-12 to 2018-19. And that is again the pre-COVID year. And what do we have? If that trend had continued, then our real GDP per person right now would have been about 30,000 rupees in this particular quarter. Now what's the gap? That's a gap of 20%. 20% gap right there. So if we try to look at the growth path that should have taken place, if there had been no COVID, this is where we should have been. That's a crucial thing to remember. All right, you'd say, well, what can we do? There was COVID? Yeah, exactly. There was COVID and there is COVID and therefore policies need to change to deal with that because let me tell you another thing. There has been a big fall in the GDP of the January to March period when there was a recovery and when we compare it to the April to June period. The April to June period has fallen sharply. People have pointed out, economists have pointed out, this is not odd because every year, and you can see that on this graph, you'll see it on this graph that every year, what happens is that between the March quarter and the June quarter, which is January to March, compare that to April to June, in the June quarter the GDP falls. That's partly because of seasonality. Certain things are produced in certain seasons which pushes up the GDP, the GDP such as agricultural products. So the June quarter always sees a slight drop. And if I take again the average for between 2012 to 2019, what do we get? On an average in the June quarter, every June quarter, what happens is that the GDP falls by about 3.2% compared to the previous quarter. So between March and June quarter, there's a GDP decline of 3.2%. We know that in the previous year, there was a dramatic drop, right? There was a huge 30% drop in our real GDP between the March quarter to the June quarter in 2020. That was because of the lockdown. It had to happen. Things weren't open. What happened in this year? You can see what's happened in this year as well. There's been a sharp decline and that decline is a 17%. Remember if we had come back to even somewhere close to recovery, our drop between the March to June quarter should have been 3%, 4%, 5%. This is a 17% drop. That means that any recovery that we saw in the first three months of this particular year, 2021, we have seen a reversal. Of course, that was bound to happen because there was a second wave that came between the April to June period. The point is to recognize it. Not to evade it. This is the truth. We have to recognize, understand it and tackle it. It's for the government, policy makers to deal with it and bring India back on a growth path. It's going to take some time, but if we are like ostriches, stick our neck in the sand and say nothing has happened and everything is fine, then it will be even worse and even more difficult to come back to our old growth path. That's the show today. Keep watching NewsClick.