FY21 GDP to be announced today; here’s what to expect

India has done very well in January-February-March but that stands of no use since the country was mostly under lockdown in April and May. There isn’t too much of a carryforward.

Normally we look at gross value added (GVA) and gross domestic product (GDP).

Gross value added is the actual output that a country adds and GDP is plus taxes minus subsidies.

The GVA is expected to be at minus 6.5, but GDP is going to fall more – that is usually very peculiar. On a general trend, GDP is usually higher than GVA.

Why is that?

According to the formula, GVA is adding taxes, subtracting subsidies and then one would get the GDP, but this time the government is going to subtract a whole lot of subsidies because they are cleaning up.

What they did in the budget was they paid back a lot of money to the Food Corporation of India (FCI) which was actually food subsidies. So, because the subsidy amount is going to be so large, the GDP will fall more than the GVA for the year gone by and that will be true for the fourth quarter as well.

The fourth-quarter numbers are positive incidentally. The GVA will come at 3 percent but the GDP will grow by less than 1 percent because the big subsidy chunk is being taken away and that’s why the GDP is lower.

Watch the accompanying video of CNBC-TV18’s Latha Venkatesh for more details.