A hypothetical proposition Ministry of Statics and Programme Implementation (MOSPI) has recently ( February 26) come up with the provisional data on quarterly estimates of GDP for Q3 of 2020-21 ( FY-21) showing that the economy is out of recession as of now as it registered a GDP growth of 0.4 per cent in the Q3 of FY21. THE THIRD QUARTER ECONOMIC RECOVERY Udayan Hazarika (The writer can be reached at udayanhazarika@hotmail.com) Ministry of Statics and Programme Implementation (MOSPI) has recently ( February 26) come up with the provisional data on quarterly estimates of GDP for Q3 of 2020-21 ( FY-21) showing that the economy is out of recession as of now as it registered a GDP growth of 0.4 per cent in the Q3 of FY21. Taking this into account, the Government in the Ministry of Finance appears to be upbeat assuming it to be the quick economic recovery. But if the data which are provisional in nature, gives the same trend when the actual data arrives, than it would be miraculous indeed in the face of our first quarter performance of 24.4 per cent contraction compared to the same period last year and the second quarter performance of 7.7 per cent contraction against the same period of last year. The present data indicates that we are going to achieve a 0.4 per cent growth over the same period last year. Arithmetically, with the available provisional data, it is possible to arrive at this figure. But if we examine the third quarter performance of last year, it would be visible that there was in fact a fall in the third quarter growth in last year as against the second quarter. In last year 2019-20, as against the second quarter growth of 4.6 per cent, third quarter growth was only 3.3 per cent. And it is under this reference that current year's third quarter growth is calculated which is giving us a figure of 0.4 per cent growth. If we separate the macro variables, it will be observed that except for Gross Fixed Capital Formation (GFCF), all other variables have registered negative growth over the third quarter last year. As against the last year's third quarter, GFCF of Rs 11.64 lakh crore current year's Q3 GFCF was Rs11.94 lakh crore which gives an increment of about 2.5 per cent. This indeed is a significant rise and a good sign for the economy as in one way, it means increase in production due to increase in investment on fixed assets such as machinery and equipment which are used in the production process. Apart from this, we have a fall in the private final consumption expenditure from Rs 21.72 lakh crore in the Q3 of last year to Rs 21.21 lakh crore in the current year – i.e. a fall of about 2.35 per cent. In order to keep the growth path of the economy intact, it is essential that expenditure on private final consumption must consistently rise. This is the highest contributory factor to the gross domestic product comprising about 55 to 60 per cent of the GDP. Thus, higher we achieve expenditure on private final consumption higher will be the GDP. Unfortunately, there was a significant fall in this variable in the third quarter of 2021 compared to the same period of last year. In case of Government final consumption expenditure, it was a pathetic scenario because despite heavy doses of pumping of funds in the sector in the name of compensating the loss suffered due to Covid-19, nothing seems to be working as the figure shows a fall from Rs 3.59 lakh crore in the 3rd quarter of last year to Rs 3.55 lakh crore in the third quarter of current year. There was also a fall in the exports from Rs 7.08 lakh crore to Rs 6.75 lakh crore – a fall of about 4.7 per cent. Because of this fall in export, despite significant fall in imports, the economy failed to reap the benefits in balance of trade in the external sector. There was a fall in the percentage participation of export in the GDP from 19.6 per cent in the Q3 of last year to 18.6 per cent in the Q3 of current year.