Exactly a year back, we had predicted an imminent V-shaped recovery in GDP growth after its sharp decline. At that time, most doubted the prediction. A former finance minister wrote: “In a barren desert without any sign of water, the finance minister and the chief economic advisor saw green shoots!”
His lack of nuanced understanding was of course clear from the statement: “About one quarter of the gross domestic output as on June 30, 2019, has been wiped out in the last 12 months.” Unlike the level of water in a tank, GDP is not a measure that captures the level of stock. Instead, like the amount of water flowing over a period of time, GDP measures the flow of economic activities in a period of time.
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Views expressed above are the author’s own.
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