Good News: Rich Are Spending

Data shows India’s top 10% in brisk consumption mode. Trend will likely hold post-festivals

- Neelkanth Mishra

Our mobility-based estimate of GDP suggests the rate of output last fortnight was where it would have been had there been no Covid: 13% above the GDP of the fiscal year ending March 2020 (FY20).

This is remarkable, not just because it seems to suggest that aggregate output is unaffected by the economic scars from lockdowns, but also as some parts of the economy are still not fully functional.

International tourism is yet to start (their total spending used to be 1% of GDP), passenger traffic on railways is still restricted (including travel to-and-from rail stations and passengers spending during travel, it added half a percent to GDP, and enabled other productive activities), state government spending on infrastructure is restarting only now (government operations were among the worst affected by lockdowns as they are not geared for ‘work-from-home’), and events involving large gatherings (like marriages and conferences) are still restricted. Car manufacturing, which is a large part of industrial activity, is also not functioning at capacity given parts-shortages. When these activities resume fully, output may rise further.

This suggests forecasts for economic growth would need substantial upward revisions. Consensus and RBI expect GDP in the quarter that just ended to be unchanged from two years back (July-Sep 2019), and Oct-Dec 2021 quarter GDP to be just 7% higher. In the next fiscal year (FY2022-23), consensus expects output to be 8% higher than in FY2019-20, whereas output today might already be 13% higher.