by Rianna Lobo
31st August 2020
The sharp fall in economy will hit a lot of people
Due to a strict national lockdown with regard to the global coronavirus pandemic during the first quarter of the financial year 2020-21, India’s Gross Domestic Product (GDP) suffered a 23.9% decrease, as per provisional estimates released by the Ministry of Statistics and Programme Implementation (MoSPI).
The April-June quarter (Q1), was predicted to fall by at least 16-18 per cent, owing to the shutdown of economic activities in March. On March 24, the Government had announced a nationwide lockdown along with the shutdown of servicing and manufacturing services as the COVID-19 pandemic began to spread across India. Only foods and other essential services were allowed to be in commerce during this period. The previous quarter (January-March), which was Q4 of 2019-20, had shown a growth of 3.1 per cent.
According to the National Statistical Office, all critical sectors, excluding agriculture, witnessed contractions, with construction experiencing the most significant drop, at a whopping 50.3 per cent. In comparison, the manufacturing industry saw a decline of 39.3 per cent. Electricity, water, gas supply, and other utility supplies dropped by 7 per cent. Trade, hotels, communications and services related to broadcasting sank by 47.0 per cent. It is important to note that these sectors are the ones that create the maximum number of jobs in the country. The only sectors benefiting in Q1 were the agriculture, forestry and fishing industry, which saw a growth of 3.4 per cent as per data.
As the GDP contracted by more than what was expected, economists now believe that the full-year GDP would also worsen. After economic liberalisation in 1990, the yearly GDP was growing at an annual rate of 7% or more, but this year the GDP might fall by 7%. The contraction of GDP also means that jobs and job seekers are in danger, therefore not leaving any opportunity for the economy to grow.
Chief Economic Advisor, KV Subramanian has told PTI that the performance of the first quarter was “driven primarily due to an exogenous shock that has been felt globally.” He also said that the country is observing a V-shaped recovery as the economy recovers. However, many opposition leaders like P Chidambaram, who had also scrutinised the BJP-led government’s GST Policy when it was brought up in parliament, have named the GDP numbers as an “economic tragedy.” He added that the country was “paying a heavy price” for the “nonchalant and uncaring” attitude of the Modi government.
The Finance Minister, Nirmala Sitharaman has referred to the COVID pandemic as an “Act of God,” and has presented states recovery plans to resolve the issue of compensation shortfall estimated to be Rs. 2.35 lakh crore.
Sources: Indian Express, Bloomberg
Edited by Hrishit Roy