As per the Central Government’s recent data, GDP in the first quarter has declined by a whopping -23.9%. That means, about one-quarter of the gross domestic output has been wiped out in the last 12 months. India sees the worst #GDP contraction in the last 40 years. All massive sectors except the agricultural sector are facing major contractions.
GDP is the total value of goods produced in a country in a given year. In simple terms, the GDP for the farmer would be the total cost of his grains that grew in a given year. GDP is directly proportional to the production in the country. The rise in production would increase the country’s GDP and vice versa. Let’s consider an example of a small businessman whose annual income reduces to 50,000 from one lakh in a year. It will directly affect the living standards of his family. Thus the reduction in GDP of a nation will directly impact the people of the country. It affects the cash flow in the country. As the demand decreases there will be a decrease in production as well resulting in loss of jobs, loss to the companies, and the eventual downfall of the economy. Let me give another example, consider a family who has been going out for dinner once every week. Now if the income of the family reduces the family may stop going out to the restaurant to manage their expenses with the reduced salary. It will impact the entire chain like the hotel staff, grocery suppliers, and other people who were associated with helping the hotel to function directly or indirectly. This will also eventually impact the farmers because they demand reduces in the market. We all know it well that irrespective of the kind of financial crisis the worst to be impacted are the daily wage earners as they don’t have any savings and they depend on their daily earnings for their livelihood. Therefore, measures required to address the GDP downfall must be discussed at all levels otherwise, it will impact the already slowed economy.
The Government releases GDP data every quarter in a year and it is for the first time that we have a negative GDP value ever since the GDP data has been published since 1996. The GDP this year has fallen to 26.9 crores as compared to 35.35 lakh crore in the first quarter of last year. The housing sector has the highest impact and sees a drop of -50.3% while the manufacturing sector has a drop of -39.3%. The construction sector after agriculture employs a large number of people and most of these jobs are for unorganized skill workers. The decline in the housing sector will increase unemployment in the future. The GDP data released in the Q1 of 2018 shows that GDP had fallen to 3.1% from 8.2% which means GDP was already on a decline since 2018 and the economy has been in bad shape ever since then.
The GST collection had seen a decline since May 2019 along with the decline in the tax collection of the central government last year. The privatization of public sector companies by the central government in the last few years also tells the story of the economic slowdown.
The consumer confidence survey which is being conducted by the Reserve Bank of India every year is based on the employment and income of the customers. It is the metrics that are an economic indicator of household expenditure. Consumer confidence is a major component of economic growth and is directly proportional to the economy. Customers can spend more when they are confident of their current as well as the future economic condition and thus confident customers indicate the positive economic condition of the country and vice versa. Some of the recent reports like the consumer confidence survey published in August 2019 were seen at its lowest in the last 6 to 7 years which is an indicator that the income and the employment of people were impacted. The Reserve Bank of India announces an industrial outlook survey of the manufacturing sector and the index of this survey must be above 100. However, the report from last year shows this index had fallen to 92-93 which means the manufacturing sector was not doing well either. The industrial production index is considered to be the report card of the industrial sector. The data published in October 2019 by IIP (Index of Industrial Production)showed a downfall as compared in the last seven years. All these above index indexes were indicators of Recession which was also mentioned by the world monitory fund in the world economic Outlook 2020 report.
Unemployment in the country is also on the rise. Last year, the SoE (State of India’s Environmental) report of the CSE suggested that unemployment had doubled in the last two years between May 2017 and April 2019.
The frequent changes in the GDP estimation by institutions like the World Bank, world monitory fund is an indicator of an unstable economy and needs to be looked at seriously. The GDP growth predicted by the World Bank for the financial year 2019-2020 was 7.5% but later in October 2019, in the same year, World Bank revised its previous forecast to 6%. On the other side, the World Monitory fund also revised its previous growth forecast from 6.1% to a new 4%, while Moody’s revised its estimate to 4.9%. Unfortunately, all these changes were not addressed seriously.
It calls for self-introspection if multiple economic experts tender their resignation. In the past few years, we saw many stalwarts like Raghuram Rajan who resigned as the governor of RBI in June 2016. Chief economic adviser Arvind Subramanian resigned in June 2018 while Urjit Patel resigned as Governor of RBI in December the same here. Viral Acharya the deputy governor of RBI also resigned in June 2019. P.C. Mohanan and J.V. Meenakshi the members of the National statistics commission resigned in January 2019 citing the lack of central government’s report on employment 2017-18 as the reason behind their resignation.
The hasty GST act was a nail in the coffin for the small entrepreneurs, people from unorganized sectors, and the economy as a whole which was already in the grave because of demonetization. The country’s imports and export play a major role in its economy. Our country imports crude oil at a large scale and the government has not seen a shortage of foreign currency unlike the UPA government due to the constant fall in crude prices for the past five years. The government should have reduced the price of petrol and diesel to provide relaxation to the people but it did not do so. As a result, it further impacted the economy even though the government’s revenue had substantially increased.
Our country was late in analyzing the gravity of the #Covid19 pandemic. The states should have been taken into confidence before imposing a nationwide lockdown. The atrocities on small businesses, shopkeepers, and the working class across the nation during the lockdown was only because it was not well planned and communicated to the states. Instead of providing financial assistance to the people affected by the #Covid19 pandemic, the central government focused upon providing loans to people & thus it did not help in increasing demand in the country. The #Covid19 did have an impact on all the countries across the world and our country was bound to suffer as well but a decline of -23% was never expected. This suggests that the Indian economy was already on the downfall and was nearing a recession. The world has seen a recession in the past as well but our country did not have much effect from it. There were times when we used to talk about double-digit growth rates but the situation today is very different. The #Covid19 has impacted the Indian economy worst as compared to other nations across the world. The country needs to make war efforts to battle the economic crisis and the ‘AtmaNirbhar Bharat’ package announcement does not seem to be effective. The central government needs to focus upon increasing the demand and expenditure in the country along with strengthening policies like MGNREGA and creating other employment guarantee schemes. Financial assistance and other entitlements need to be provided to the states on-time. States have limited financial resources and have important subjects like education, agriculture, and health to look after. We need to strengthen the economic condition of states to help the economy grow faster.
One should always visit a doctor when not well as hiding the disease will not necessarily heal it. Similar is the economic condition of our country today where the government needs to pay ears towards the predictions of world institutions like the multiple indexes released by the RBI, the estimates of many institutions in the country, along with the opinions of economists. It is only through an impartial and transparent discussion about these reports that the economy can be brought back on track. As our late Prime Minister honorable Shri Atal Bihari Vajpayee Ji once said ‘Satta ka khel to chalega, sarkaarein aayengi jaayengi, partiyaan banengi bigdengi, lekin ye desh rehna chaahiye, ye loktantra rehna chaahiye’. The central government should consider taking the opinions of the economic doctors of the country to bring the economy back on track.
It is the need of the hour for the ruling and the opposition parties to keep their political differences aside and come together in finding a solution & fight the economic crisis which our country is going through to avoid further damage. Creating new job opportunities along with retaining the existing jobs for the youth is a major challenge in front of the nation today.