The promise of a 5 trillion economy by 2022 hit a major setback as the GDP of India hits its lowest number in decades. Since the government started publishing growth rates in 1996 every quarter. With the new financial year (FY’21), the GDP of India in its first quarter saw these high dropping figures of 23.9% which showed the state of an already crumbling GDP with a 3.1% growth rate in the previous quarter. Thus, has become the talk of the nation regarding its economic future and its further implications.
India has been in a state of lockdown since March of this year and amidst the COVID crisis. Where every major sector is facing a downfall by huge numbers, the economy was hit the worst felling to 26.9 lakh crore when talking in constant terms and the nominal GDP to 39.08 crores in comparison of last year a fall of 22.8%. This date on the contraction of GDP in India was released by the Ministry of Statistics. And program implementation earlier this month.
The month of April experienced the worst state of economic crisis as the whole country faced a complete lockdown with zero to no developments and halting major economic decisions. The worst-hit sector among all was that of construction as all the projects around the country were stopped till further notice, date revealed that the sector saw a contraction of 50.3 % and not just construction many other sectors that were directly affected by the lockdown were Trade, hotel, transport, communication sector which contracted by 47%, Mining sector contracted 23.8%, Manufacturing contracted 39.3%, Financial services sector contracted by 5.3%, Public administration, Defence and other services contracted by 10.3%.
Interestingly the sectors that were not directly associated with the implementation of lockdown. And could be carried out also saw a decline such as the agriculture industry. Though on a decline the industry showed a growth of 3.4% as transportation. And the availability of materials becomes difficult or delayed to reach the farmers.
One thing to point out that the numbers are shown above only tell half the story, if you haven’t noticed already the data shared only covered the organized sector with agriculture being the only non – organized sector. This sector comprises 45% of the economy and is responsible for the employment of 94% of contributors to the GDP of India. The data in this sector is usually collected every five years. So, there is no source able data that can show the state of this sector. Usually, it is approximated with context to the organized sector. But it is not the best way to estimate such a fluid sector.
The Agriculture sector is its biggest component and contributor but apart from agriculture. Other parts of the unorganized sector faced a very difficult time during the lockdown. They weren’t getting enough manpower nor the goods. At the same time, people were confined to their homes. And often avoided coming out caused a huge drop in sales causing many such ventures to shut down.
India’s currently doing the worst among other leading economies we with Britain just behind with a 20.4% contraction. On the other hand, our neighbor and rival China has successfully turned about the situation as the first one to be affected by this crisis and had faced a drop of around 6.8% to a growth of 3.2% in its last quarter. The drop was naturally estimated by many economists because of the lockdown. And stated it around 15%-18% but this new data has far exceeded any prediction made by many forums. Though the situation seems dull at the moment many international organizations. Such as the International monetary fund has stated that even though the decline might increase the country will see a bounce and a growth of 6 % in the coming financial year.
Even with the initial drop in the economy before the lockdown and now this huge fall due to COVID. The question arises about the impact this will leave and what lessons should be considered for the future. This drop might cause a number of unemployment and recession that the country might have never faced before, for this certain relaxation should be effectively provided by the government and bold effective measures should be executed otherwise this could have long-term implications on the GDP of India.
This might be one of the most difficult times in the history of the nation. And not just considering financial issues, in the current situation, we have everyone looks up to the government for support. And direction at the same time we can also consider ways through which we can help our economy. Many campaigns are being promoted such as “vocal the local” with which people support local craftsmen and daily earning sectors. This not only makes sure that they have got enough to live sufficiently through these tough times. But also increased money flow in the domestic economy.
[ Must read: How to safely run your construction business amidst COVID-19 ]