Short-term decline in GDP growth rate due to Covid19, ‘V’ shape recovery expected

By Prof. Vivek Singh

Today people are discussing about GDP. Those who do not know the ‘E’ of economy are also counting the figures of decline in GDP. Those who were arguing that they do not want to discuss about data, today they are looking only at data. Stories about contraction of GDP are being created. Has the fall in GDP affected the lives of ordinary people? Is GDP Fall Real? Has the decline in GDP occurred only in India? is global GDP not shrinking? Is there no role of Covid-19 in it?

There is decline in GDP of all major economies due to lockdown imposed in response to Covid19. The Corona pandemic has led to reduced industrial production, reduced demand for services, reduced business activities for 8 months. As a result GDP has declined. There is no lack of enthusiasm among the industrialists of the country. There is no change in the hard work of farmers, workers and businessmen. There is no problem in the policies of the Government of India regarding development of the country. New policies are being made for economic development. To improve the economy, government has given an economic package of ?21 lakh crores. The central government is doing what a sensitive government should do.

Why is so much fear being spread in the country about the decline in GDP? It is more important for the government to save lives of 135 crore people and not to think about GDP. Prime Minister Narendra Modi has taken far-reaching decisions. Ultimate goal of GOI is to protect the lives of 135 crore countrymen. It is the duty of a government to be ready to protect the lives of its countrymen. 29% drop in GDP in a quarter is not a big deal. The lives of the people of the country cannot be endangered. The way GDP has fallen in the same manner will increase again in the coming months. No power of the world can stop the economic development of India. This is a short-term obstacle in economic development.

If we compare the current financial year April-June quarter with the same quarter of the previous year we will find that there has been a huge decline in the GDP of all the countries of the world.  GDP of spain has declined by 22.1%, Britain 21.7%, France 18.9%, Italy 17.7%, Canada 13%, Germany 11.3%, Japan 9.9% and America’s GDP by 9.1%.

In the first quarter of April-June of the current financial year, the GDP of India decreased by 23.9%. The previous quarter saw a 3.1% increase in GDP between January-March as the Covid19 was in its early stage. India’s GDP grew by more than 5.2% in the financial year 2019-20 April-June quarter. The Indian economy recorded a growth of 6.1% in 2018-19 while a 4.2% growth was recorded in 2019-20.

The reason for the  fall of GDP by 23.9 percent in the first quarter of April-June of the current financial year can be clearly understood. According to the data released by the NSO, the growth rate of construction decreased by 50.3%, 20.6% in service sector, 23.3% in mining, 45% in trade and hotels, 10% decline in public administration. The reason for this decline was due to the declared nationwide lockdown. There is recession all over the world because of Covid19 pandemic.

All countries nare facing economic problems. ‘V’ shape recovery has started in the Indian economy. This recovery will clearly be visible in the figures in the coming few months. There has been a short-term decline in the growth rate of GDP. It will not have any far-reaching impact on the Indian economy. 

The faster GDP falls, the faster the GDP grows in the ‘V’ shape recovery model. There will be a tremendous increase in our GDP after having full control over Covid19 or Covid19 vaccination. Unrestrained babble about GDP should stop.There will be neither ‘U’ shape recovery nor ‘L’ shape recovery, there will be only ‘V’ shape recovery in the economy. 

(The author is columnist, professor of Commerce, Political and Economic Analyst. He can be reached at viveksinghmumbai@gmail.com)