Yesterday, the Indian government released the latest data oneconomic growth for financial year 2020-21. The GDP of the country fell by 7.3%during April 1, 2020 to March 31, 2021. Though this figure is nominally lessthan the projected fall of 8%, but even a decrease of 7.3% is exceedingly high.
But, there is pandemic also. The last time something likethis happened was the Spanish Flu of 1918, about 100 years back.
So, the question now is whether this contraction of theIndian economy is something systemic to the whole world or something peculiarto India under the leadership of PM Narendra Modi.
It is pertinent to mention that the Modi-led governmentrecently completed its seventh anniversary.
There is no need to any visceral reactions – either for oragainst anyone - as cold hard numbers will be looked into to form a perspectiveon the reality of India’s GDP contraction.
Fundamental measures of economy of any nation are figuresthat track key characteristics that determine the country’s economic stabilityand health.
Gross Domestic Product (GDP)
The GDP growth rate has been weak from the last five of theseven years. Studying the data released in Reserve Bank of India (RBI)’s AnnualReport for Financial Year 2020-21 on May 27, the following picture emerges:
After the devastation caused by the Global Financial Crisis,the Indian economy found foothold and began recovery in March 2013. This wasabout a year before the current government took charge.
However, since the third quarter of 2016-17, the GDP begandropping consistently. Experts claim that the government’s decision to abruptlydemonetize 86% of the nation’s currency on November 8, 2016 caused thisavalanche of GDP contraction.
The experts further believe that this rapidly declining GDPwas further fuelled by Goods and Services Tax (GST) implementation.
Then, there were massive bad loans all over the Indianbanking system.
And on top of all this, pandemic COVID hit the country andthe world.
The Indian GDP fell to a 42-year low in January 2020. Thepandemic hit in March 2020. Thus, the Indian story was already in shamblesbefore there was any pandemic.
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GDP per capita
GDP per capita i.e. GDP divided by the total populationhelps estimate how an average person in the nation is faring.
According to the data released by Ministry of Statistics andProgramme Implementation (MoSPI), the GDP per capita now is where is was in2016-17.
The nation’s performance in this key metric has been dismalenough that Bangladesh has overtaken Indian in GDP per capita.
Unemployment rate
The worst performance has been displayed in this metric.
The employment rate in India was at a 45-year high in2017-18. Again, this was the time after overnight demonetization and GST.
India usually has an unemployment rate of 2%-3%, but in theyears leading up to the pandemic ran close to 6%-7%.
The pandemic COVID then struck down and left no stoneunturned to make matters considerably worse with job.
All in all, an analysis of the data indicates that thefinancial mess that India finds itself in is not due to the pandemicCOVID, though it may have made it worse.
The government has a tall order to achieve otherwise therecovery may take on years to materialise.