Tumbling down -Renu Kohli
The slump in the GDP and the pain ahead
The -23.9 per cent shrinkage in the April-June GDP is not a surprise as nearly half the period witnessed a national lockdown. It’s also not surprising that this loss is the world’s steepest for India’s lockdown was the most stringent and the accompanying fiscal policy response the weakest. But the quarter per cent slump did surprise most analysts who have since rushed to savagely cut India’s annual growth forecast; on average, these have doubled down into the -10 per cent range, a possibility this author anticipated two months ago. Growth probably contracted more severely, although early estimates do not fully capture India’s large informal or unorganized segment whose performance is initially based upon the listed companies’; the -36.2 per cent decline in indirect tax revenues indicates a more severe decline. As we are now nearing the end of next quarter end, it’s useful to combine these numbers with newer information to get a grip on the distributive effects and the road ahead.
Let’s first examine the April-June performance. Production contracted in near-similar magnitudes (40-50 per cent) as restrictions applied everywhere except agriculture where harvesting and procurement continued and the virus hadn’t then spread; construction and services saw somewhat larger declines. A bolt out of the blue is the -10.3 per cent decline in public GDP (public administration, defence and other services) where positive support was expected from sustained government expenditure. This has trained focus upon ‘other services’ (56 per cent share), which include education, health, recreation and numerous personal services; it is a revelation that the plunge here was too steep for the increase in public spending to counter.
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The Telegraph, 15 September, 2020, https://www.telegraphindia.com/opinion/the-slump-in-the-gdp-and-the-pain-ahead/cid/1791998?fbclid=IwAR1kSHHX2m-H37NNB838hqTCsutNl9ghkUlxgG0pAlwvZ2KBUp-Zk_dRd4Y