A look at this phase of economic depression that’s plagued the Indian Economy

In my last article, I had explained that India’s quarterly growth figures calculated for the April to June quarter contracted by -24%.

https://steempeak.com/@mintymile/the-indian-economy-is-one-of-the-worst-performing-economies-of-the-world-today

https://indianexpress.com/article/explained/gdp-contraction-23-9-the-economics-behind-the-math-6578046/

India’s decline is definitely way more than -24%

The actual extent of the decline of the Indian Economy is actually far more than 24%, this is because data that is collected has not considered India’s informal sector that employs 75% of the population. Informal sector like the small shops and businesses, the street vendor, fisherman, the roadside tea stall seller or road side eatery business person definitely is going through a lot of hardships, and these entities have received almost negligible support from Government in terms of handing them out money to compensate for their loss of business activity and earnings. Therefore, you can bet that India’s growth decline has been near to 45% or more certainly not 24%.

This 24% data is collected provably from records that generally well to do companies post - on industrial production etc, it’s a very small sample .

Behind the scenes look at India’s drastic fall to Economic Depression

Now, let’s evaluate the economics behind this economic depression resulting in negative growth of the Indian Economy by a large percentage of -24%.

A 27% decline in Consumer demand in the alluded to quarter

Private Consumption by individuals has declined because they have less to no income to spend. During a boom period, people will have a lot of disposable income to spend, now it's the opposite of that. This is the component of C constituting GDP.

Compared to last year’s April to June period, the C has declined by 27%, this consumer consumption shortfall when quantified amounts to Rs 5,31,803 crore.

Steep decline in Business Expansion and Private Investment in the Indian Economy

Private Investmenthas declined in monetary terms by Rs 5,33,003 crore compared to the same period last year. This is the component of I constituting GDP.

This means expansion of business is not happening, probably because companies are not confident about the economic climate prevalent in the country. One can associate this and understand that job creation is not happening, to even employ the educated now.

Government measures to ensure people get money in their hands has not been enough

Government Expenditure is another component that drives the growth of the economy. Here the Government either spends on launching labour intensive infrastructure projects like road building works, bridge construction activities etc or Govt. can undertake to do direct transfer of funds to people.

The idea here is that people get money to spend, so that they have the purchasing power to demand goods and services. This in turn attracts private investment as businesses would expand to cater to the increase in demand.

At the above discussed quarter, although C (overall consumer demand) and I (Private investment) declined by a total of Rs 10,64,803 crore, Government expenditure only increased by a meagre 16% to 68,387 crore.

Indian Government’s Draconian Lock down without compensating people and businesses

This means that although companies, businesses were cutting down on production due to severe demand crunch and covid induced shut downs, the Government did not spend enough to compensate for this vacuum.

Existing construction projects that employed labour, suddenly closed down during the lockdown period from March 25th to May 14th, so the labour class did not earn anything to survive the lockdown period. It should be noted that in most other countries, construction works continued during the lockdown and the workers were given basic welfare required to continue their work.

There is no denying that direct cash transfers were a need of the hour but Government had not come up with a fiscal policy measure that would have given cash to small businesses and the common man at a time when sales, production was not taking place because of the disruption caused by the Carona Pandemic which India’s finance minister conveniently attributed it to an “Act of God.”

No significant earnings from Exports

Import and Export earnings of India also add up to the countries GDP, it is the NX component constituting the countries growth. Generally, India imports more than it exports but due to decline in economic activity and fall in demand, plus global supply chain disruptions India’s imports were not in excess of its exports during the period discussed here. No positives to the Indian economy through this NX component too.

Reference article -: https://indianexpress.com/article/explained/gdp-contraction-23-9-the-economics-behind-the-math-6578046/

Yearly Growth estimate of the Indian Economy will be in the -minus territory for sure!!

This time India’s yearly GDP figures is expected to be in minus as well with -7% being a conservative estimate. This will be the first time since 1992, post liberalisation era that India experiences a negative GDP growth rate, as
on average the country’s GDP till now has been growing at average of 6.8% since 1992.

Image taken from this Indian Express article

Inspite the growth of the Indian economy for so many years, the majority of India has still been poor and now with a negative GDP growth , we can imagine that it’s going to be damn ugly and difficult for this majority of the Indian population.

No hopes for recovery of the Indian Economy any time soon

As for recovery...well, Government supporting economic experts have been all optimistic during June time when the lockdown eased as they saw some green shoots in growth figures, but recovery will not happen for now, forget its shape of being in a V…

Lately the harsh lockdown has crippled the daily wage earners and it’s been tragic their condition from dignified people earning their food and living, they became beggars on the road. Thankfully, that lockdown phase is over, but damage is done whose suffering the Indian Citizens have to bear with the poor the most vulnerable the first to get hit. Next in line, are the others who well to do… fingers crossed.

Will continue more on the Indian Economy next week.