oppn parties The Economy: Contraction Slowing, But Real Growth Still A Long Distance Away

News Snippets

  • Supreme Court sentences Congress leader Navjot Singh Sidhu to one year rigorous imprisonment in the 1988 road rage case
  • Home Minister Amit Shah says rights should not be demanded before fulfilling responsibilities and that universities are no place to wage ideological battles
  • NIA court convicts JKLF chief Yasin Malik in terror funding case after he pleads guilty of all charges
  • A study backed by PM-EAC has recommended universal basic income and urban job guarantee and greater spend on social sector schemes
  • Supreme Court rules that the decisions of the GST Council are not binding on the Centre and the states, leaving the door open for states to levy further taxes
  • After sustained campaign by BJP MP Arjun Singh, the Centre today withdrew the jute price cap order, industry welcomes move
  • Akasa Air might postpone its July launch due to late arrival of aircrafts
  • Metro Cash & Carry decides to sell Indian operations. All major players, including Reliance retail and Amazon, are likely to bid
  • Local and global cues spook the markets on Friday - Sensex crashes 1416 points to 52792 and Nifty by 430 points to 15809
  • IPL: RCB crushes GT by 8 wickets as Virat Kohli returns to form with a well-made half century
  • Nikhat Zareen is world champion in flyweight category. Wins gold at Women's World Championships at Instanbul
  • Supreme Court uses its special powers under Article 124 to release A G Perarivalan, a Rajiv Gandhi assassination convict
  • Indrani Mukherjea, prime accused in the Sheena Bora murder case, gets bail from Supreme Court after 6.5 years in jail
  • Hardik Patel quits Congress, says top leaders distracted by mobile phones and state leadership busy arranging 'chicken sandwiches' for them
  • Anil Baijal resigns as Lieutenant Governor of Delhi citing "personal reasons"
Nikhat Zareen is crowned world champion in the flyweight (52Kg) category at the Women's World Championships in Istanbul /////// Supreme Court sentences Navjot Singh Sidhu to rigorous imprisonment of one year in the road rage case /////// Sunil Jakhar, who quit the Congress a few days ago, joins the BJP
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The Economy: Contraction Slowing, But Real Growth Still A Long Distance Away

By Sunil Garodia
First publised on 2020-11-28 11:24:56

About the Author

Sunil Garodia Editor-in-Chief of indiacommentary.com. Current Affairs analyst and political commentator.

The Indian economy technically entered a period of recession as it contracted by 7.5 % in the second quarter of 2020-21. Although the decline was lower than expected (most economists had expected a 10% decline while the RBI had put out a figure of 8.6%), still the slump was enough to sound alarm bells. While the government said that the numbers were better than expected and the potential for upsurge was visible, it also sounded a worrying note for a second wave of Covid infections.

But the figures are not so rosy. Except for agriculture, which grew at 3.4% (Q1 3.4%), manufacturing which grew at 0.6% (Q1 -39.3%), and power and gas, which grew at 4.4% (Q1 -7 %), most other sectors continued to show negative growth. Services continued to be heavily in red. Although the rate of contraction was narrowing, yet the sentiment was not improving.

Core sector industries showed a decline of 2.5% as refinery output and steel production declined enormously. The dismal performance of this sector has a huge bearing on the overall industrial data as core sector carries a weight of 40%. Similarly, the services sector has always contributed handsomely to the GDP. It is a sign of the times we live in, where personal contact is avoided, that the services sector is showing continued negative growth. It also means that despite penetration of mobiles and internet, online transactions have not really taken off as expected, which was reflected in financial and professional services declining by a bigger 8.1% in Q2 (Q1 5.3%).

When it is considered that Q2 included the festive season buying, one does not have much hope for Q3 based on these numbers. Demand has not shot up as a whole and the December GST collection figures will give a better picture of which way the economy is headed from here. Although the government talks about having done much through its Covid packages, those were all supply side and lending packages. They have clearly not had the desired effect of boosting demand. Hence, the government should not further delay investments in infrastructure projects. Only then will core sectors show positivity and the whole economy will perk up as a result of that.