A Great Fall of 23.9%

Figures above 50,000 look good in salary. But what if it's a contagious flame of a pandemic? India is witnessing a hike of more than 90,000 COVID positive cases each day. Amidst this situation, students are driven by the career forces to appear in the JEE  and NEET exam where social distancing is merely visible. Meanwhile, data released by the government confirmed that India is confronting a GDP contraction by 23.9% for the first quarter of 2020, i.e., for the April - June period. Though the steepest decline in annual GDP of India was recorded during 1979-80, this marked the worst incident of negative quarterly GDP growth in India since 1996 (quarterly GDP was recorded for the first time in 1996).  

Although China recorded positive growth, major economies are facing a downfall in the quarterly GDP as compared to 2019. It cannot be denied that lockdown is one of the crucial reasons for it.  The United Kingdom(UK) reported a 21.7% shrinkage in their quarterly GDP, whereas France and Italy by 18.9% and 17.7% respectively. The situation in the UK is quite obvious because of BREXIT which puts downward pressure on the economy and is aggravated by the pandemic. Again France and Italy are among the worst affected economies which suffered a devastating spread of the novel coronavirus. All other countries which reported a GDP degrowth are due to the outbreak of the pandemic and so as India.

But is it ok to blame the pandemic for every ailment?  Falling GDP can be seen from the second quarter of 2018. The reasons are crystal clear. While the government encumbered the market with demonetization, the citizens were further burdened to put their best efforts in clearing the concepts of goods and services tax (GST). Unable to cope with these shocks, certain MSMEs succumbed putting a load on the economy. Bankruptcy Code to deal with the challenges of rising NPAs didn't do much. Even before the economy could gain some strength, the pandemic hit hard!

Twitter is trending with hashtags on unemployment. The unemployment rate reached 23% during April-May. However, little progress has been recorded in the month of June where the rate of unemployment fell to 11%. But job losses are in millions. Each sector is experiencing a downfall in GDP growth rate except agriculture which recognizes a positive rate of growth of 3.40%. But why only the agricultural sector? This is because due to job losses in the manufacturing sector forced a huge mass shift from the urban to the rural sector engaging in agriculture.

The high inflation rate is further antagonizing the situation. According to the government reports the inflation rates crossed the benchmark of 6% in July 2020. This is gruesome for a jobless scenario because this gives rise to the situation of the paradox of thrift. People will save more due to uncertainty about the future than they invest. As a result aggregate demand falls and so as the GDP. 

Though there is an economic setback, the revival is not so far.  For the time being it is important to raise aggregate demand. Direct transfers to every household cannot be fruitful as the money may not be invested due to a lack of security. So the aim must be to gain the confidence of the investors. Direct transfers may prove beneficial for very poor families who are unable to fulfill their basic needs. Repaying states its GST dues may help the state government to work efficiently. It's irrefutable that the government officials are trying their best. Their efforts will lead to the path of the sunshine.