Скачать или смотреть India's Worst GDP Crash | Recession ?

On 31st august 2020 India's National Statistical Office released the GDP estimates for first quarter for the current financial year FY21. And the GDP numbers were worst than expected. India's GDP growth from April-June quarter of 2020-21 slumped 23.9%. This is the worst slump since the country started releasing quarterly data in 1996. Among other major economies, India’s contraction was the sharpest.
Now from what are these GDP numbers derived from?
Below you can see how GDP is calculated. In this the Consumer spending which is the largest contributor in GDP has seen a 27 percent fall compared to the first quarter last year. Similarly, Investment by the private sector has also seen a massive 47% fall. But Government spending is increased by 16%. This helps the economy but the government cannot sustain large spending for a long time, due to low income and limited Tax collection. Next the net export-import has increased by 165%. This seems like a good thing but it shows that demand of consumers has dropped significantly. Hence the reason for drop in import. Now in this data if you look at major sectors of the economy you will see that except agricultural all other sectors have shown minus growth rates. But the question, why India's GDP worst number is still unanswered.
This question was asked to the government. To that India's Finance minister said, and we quote "it is an act of God."
Now, lets look at the actual reasons behind this.
Worst performance is not just due to the covid crisis. Yet India was already going through an economic slowdown. India's GDP growth was contracting continuously from the last eight quarters. It was 7.3% in March 2018 and had fallen to just 3.1% till March 2020.
One of the major reasons behind this slowdown is the demonetization in 2016. This caused disturbance in the cash flow of the economy. Similar GST implementation also hit the economy badly. As it was aimed to generate more tax revenue, but in reality tax revenue has seen a decline. Apart from this one other aspect was low investment in businesses. And this happened due to bad business sentiment, high Nonprofitable assets of banks, unstable international market, and Social and political unrest in India.
So the indian economy was already going through a slowdown. The contraction was expected but the covid crisis made it way worst than expected.
Now what made this quarter worst for india?
According to some experts, the government also failed in the implementation of lockdown. The Central Government implemented a strict lockdown in the entire country. Instead of giving more authority and freedom to the state government. So this stopped the economic activities completely and lead the GDP to rock bottom.
Now How this low GDP number will affect normal people?
Normally in a slowdown GDP falls sharply, and with it the prices of consumer goods also fall. But this is not happening in india right now, rather prices of consumer goods are increasing And this due to disturbance in the supply chain. As a result of this Inflation is increasing.
Apart from this Unemployment is also a major problem in front of India. Even before the covid crises, unemployment rate was 45 years high. So now imagine how bad will this number will be after this crisis. In the end it will be harder for normal people to survive in this kind of economic situation.
Now how much time will the recovery take?
Well Experts fear that India is staring at a recession. And we cannot expect this to recover fast. It is going to take its own sweet time. Next quarter could show a V-shaped recovery, but the GDP number will probable remain negative. And if this happens then india will enter recession officially. Many expert believe that India would see positive GDP growth after quarter 4 of this fiscal year.
So, what should the government do now?
In the more immediate term, the government needs to focus on reversing the collapse in domestic demand and private consumption. As this coutributes 60% of the GDP. It could be done by more aggressive fiscal, and monetary response to get the economy back on track. Also to start the flow of money in the market, government must bring back the labour force to work. And this can be done by opening all major industries completely.
But all of this could be done only if, the government first controls the covid infection cases. And if covid infection cases rise with similar speed as of today, then the situation could get worse.
So only good government policies, and right economic decisions unlike before could reboot India.

#indiagdp2020 #indianeconomy
Instagram (Global Index): https://bit.ly/2YjIex8

Stock footage provided by Videvo, downloaded from https://www.videvo.net

Music Credits:
https://www.bensound.com/