oppn parties The Economy Is Tottering

News Snippets

  • Supreme Court stays Karnataka HC order blocking operations of Kannada news channel Power TV. Says right to free speech must be "zealously protected" by courts
  • Opposition slams Centre for Samvidhan Hatya Diwas, says the Constitution is being murdered on daily basis under the present BJP government
  • Centre notifies June 25 as 'Samvidhan Hatya Diwas'. This was the date on which Indira Gandhi imposed the Emergency in 1975
  • Bengal moves SC against state governor for keeping 8 bills pending
  • Mamata Banerjee meets Uddhav Thackeray in Mumbai, says 'khela on' and promises to campaign for his party in the Maharashtra assembly elections
  • Stars and eminent persons from across the globe attend the wedding of Anant Ambani with Radhika Merchant at the Jio World Convention Centre in Mumbai
  • Controversial IAS trainee Puja Khedkar faces dismissal from service if her quato and disability claims are found false
  • SC says stay on bail should be in rare cases like terrorism or where order is perverse otherwise personal liberty and Article 21 will go for a toss
  • Supreme Court says judicial review of arrests by ED is necessary to check improper exrecise of power to arrest
  • Supreme Court grants interim bail to Arvind Kejriwal in the money laundering case in Delhi liquor policy case but he will remain in jail as he is under CBI detention in the corruption case in the same scam
  • Retail inflation rises to 5.1% in June, the highest in 4 months
  • Government to avoid merger of BSNL-MTNL. Instead, MTNL's operations will be shifted to BSNL to give the latter an all-India presence
  • Women's U-19 Asia Cup: India to clash with Pakistan on July 19
  • Paris Olympics badminton draws: P V Sindhu in easy group but gets a tough draw later while H S Prannoy and Lakshya Sen might clash in pre-quarter finals
  • After two consecutive wins, India look to seal series when they meet Zimbabwe in the 4th T20 today
BJP and allies win all 9 seats they contested in the Maharashtra Legislative Council poll
oppn parties
The Economy Is Tottering

By Linus Garg
First publised on 2020-06-01 13:28:27

About the Author

Sunil Garodia Linus tackles things head-on. He takes sides in his analysis and it fits excellently with our editorial policy. No 'maybe's' and 'allegedly' for him, only things in black and white.

The GDP figures for the fourth quarter of the current financial year released by the NSO paint a grim picture. Keeping in line with the situation on the ground, the revised data of the first three quarters of this financial year shows that the economic slowdown, even before the coronavirus crisis, was more pronounced than was previously estimated. When the data for the first three quarters was released at the designated time in 2019 and early 2020, it was not in tune with the situation on the ground. Most sectors of the economy were suffering from a lack of demand and inventory was piling up. Even the revised data for those quarters released now do not show the correct picture. Hence, the economy had slowed down considerably even before the coronavirus crisis hit it.

The data released now cannot also be relied upon in full because the timeline for submitting financial returns has been extended due to the pandemic. Hence, the current data has been released with limited inputs and is subject to downward revision once the full set of inputs is available. Yet, the data clearly shows that the economy is heading downhill at a rapid speed. The eight core industries contracted by 38 percent. Private consumption slumped to just 2.7 percent from 6.6 percent in the Oct-Dec quarter. Imports (leaving out oil and gold) went down by 52 percent while exports declined by 60 percent. Credit off-take is not happening as both businesses and individuals are wary of borrowing in these difficult times.

Growth in gross value added was just 3 percent but if agriculture, public administration and defence are left out, the rest of the economy provided just a depressing 1 percent growth to the GVA. Manufacturing has now contracted for three straight quarters, and the pace of contraction has become deeper in each successive quarter. Similarly, the construction sector has contracted for two straight quarters. Trade, hotels and communication, finance, real estate and professional services have all slowed down considerably. The power sector has shown some improvement (it contracted by 22.8 percent in April when the country was under full lockdown but improved to a contraction of 14.9 percent when restrictions were eased in May). But only the full data of the April-June quarter will show the true impact of the lockdown. It is now clear that the full years' data for the financial year 2019-20 will show considerably lower growth that was previously expected. It remains to be seen whether the economic package pushes up demand and revives the economy.