There is finally some good news on the economic front. If the figures released by the National Statistical Organisation last week are any indication, India has emerged as the fastest growing economy during the fiscal year ended March 2022. Though the GDP growth has plummeted to 4.1 per cent in the last quarter (January to March 2022) from 20.1 per cent in the first quarter, 8.4 per cent in the second quarter and 6.4 per cent in the third quarter, the GDP growth rate for fiscal 2021-22 works out to 8.7 per cent. Though this is lower than the government’s second advance estimate of 8.9 per cent, the annual rate of 8.7 per cent works out to be the highest growth rate among major economies, making the Indian economy the fastest-growing in the world. This pace of growth was partly due to a low base of the previous year when the economy contracted by 6.6 per cent on account of the Covid-19 pandemic. Though India emerged as the fastest growing major economy in the world, its GDP was just 1.37 per cent higher than the pre-Covid level of fiscal 2020.

Unfortunately, after the pandemic restrictions were lifted and economic activity was poised to rebound, the Russian war against Ukraine played the role of villain by sending energy and commodities prices soaring to sky high levels, further straining global supply chains and hitting business confidence. However, some consolation was provided by the poor economic show by almost all other major countries, making India the fastest growing economy at 8.7 per cent.

More good news came from the Ministry of Commerce and Industry, whose data revealed that the eight infrastructure sectors of the economy – coal, crude, natural gas, refinery products, fertilisers, cement, steel and electricity — also grew at the fastest pace in six months between November 2021 and April 2022. These sectors expanded by 8.4 per cent in April 2022 from 4.9 per cent in March. As this was despite the high base a year ago, it clearly indicated that prospects are bright for the manufacturing sector.

Even as the robust core sector data offer hope for the near future, the gap between the real and nominal GDP widened by more than 10 percentage points in the previous fiscal. The nominal GDP stood at 19.5 per cent in fiscal 2022. Inspite of this good news, the villain of the piece – the inflationary price spiral – has been raising its ugly head, vitiating the economic environment. In fact, the difference between the real and nominal GDP suggests that inflation has been a persistent problem and the economy has been fighting the challenge of rising prices for quite a long time now.

After dilly-dallying for a long time, the Union government reduced excise duty on petrol by Rs 8 per litre and on diesel by Rs 6 per litre. This duty reduction has brought down petrol prices by Rs 9.5 per litre and diesel prices by Rs 7 per litre. But of late the prices of these fuels have shot up to such an extent – from around Rs 60 to Rs 120 per litre on petrol — that this reduction in prices will have little impact on the budget of the common man. It is really shocking that though this is a welfare state and the Modi government shouts at the top of its voice that it has a “people-first focus”, nobody bothers about the untold sufferings of the people in general and of the poor, low-income groups and lower middle-income groups in particular. The steep rise in petrol/diesel prices has played the role of catalyst for pushing up inflation. The time has come for the government to bring these fuels under GST.