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

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: 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.