US GDP Fell By 9.1%, Not 32%, What Is India’s Position – Free PDF Download

Why the confusion?

• It is because the way the US reports GDP growth/contraction is different from the way India

YOY Vs QOQ

• Year-over-year (YOY) is the comparison of one period with the same period from the previous year.

What Is Annualization?

• To annualize a number means to convert a short-term calculation or rate into an annual rate.

Example

• Let’s assume during the January to March 2020, the size of the Indian economy or its GDP was Rs.100.
• In April to June 2020, this contracted by 10%.
• The size of the economy came in at 90 (Rs.100 – 10% of Rs.100).
• Now the annualization means the same trend will continue in next 3 quarters.
• Thus in July to September 2020, the economy will contract further by 10% to Rs.81
• October to December 2020, the economy will contract further by 10% to Rs.72.9
• January to March 2021, the economy will contract further by 10% to Rs.65.6
• Hence, overall the economy has contracted from 100 to Rs.65.6 or by 34.4%.

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