If you have been active on the internet or watched the news lately, you must have seen or heard Times Now anchor/s asking why experts on their programme wanted to discuss the GDP when they were talking about Rhea Chakraborty.
Here’s another one:
Well, to keep it simple, here’s why we can’t stop thinking about the GDP right now!
1. This is the lowest the GDP has contracted in 40 years.
And this is the worst quarterly GDP numbers ever recorded since India started recording GDP on quarterly basis in 1996. Suvodeep Rakshit, Vice President & Senior Economist at Kotak Institutional Equities spoke to Business Today regarding the same and said:
Real GDP growth at minus 23.9 per cent in Q1 FY21 was much lower than what markets were expecting. The print indicates that the trough in the economy was much lower than expected and the pickup will likely be more elongated.
2. The government hasn’t even addressed the unprecedented economic slowdown, even though the GDP was already facing a slowdown before COVID-19.
On the 27th of August, before the GDP data was made public, Finance Minister Nirmala Sitharaman had infamously said that the Indian economy was facing an extraordinary ‘Act of God’. However, the GDP was already on a downward spiral for slightly more than a year before COVID-19 even hit us.
3. While the Modi govt did announce a nearly $21 billion package to help the economy, it has failed to help the sharp fall in demand and rising inflation.
According to India Today, reversing this decline in consumption seems to be the biggest challenge for the government. Mind you, demand was already a little shaky last year but the panicked lockdown worsened it. If demand continues to be subdued for the remainder of 2020, the annual growth rate is also likely to go down more than 5%.
4. India will most certainly go into a recession.
We would need to have a GDP contraction in two straight quarters for us to be in a recession. According to Business Today, ‘weak investment, capital spending and consumption demand will keep negatively impacting the economy’. So yeah, we are very likely to go into a recession. The next quarterly announcements will also reveal if the contractions are worse than that of the first quarter, given that data collection was also affected due to the pandemic.
5. Opposition parties had warned the government of this and pleaded to take ‘preventative and pre-emptive’ measures
Earlier today, former FM P. Chidambaram spoke to the Indian Express and expressed his disappointment at the current state of the Indian economy. Pointing at the annual report that had predicted a contraction ‘deeper and more destructive than the Great Depression and the Global Financial Crisis (of 2008)’. He said:
The economic tragedy was foretold by many close observers of the Indian economy, most recently by the RBI in its Annual Report released a few days ago… We had warned the government and we had urged the government to take preventive and pre-emptive measures. Our pleas fell on deaf ears. The country, as a whole, is paying a heavy price, the poor and the vulnerable are in despair.
6. The pandemic has not only caused a contraction in demand but also amplified other issues like high public debt and weaker tax collections.
According to India Today, the massive spike in inflation has caused millions of household to spend less on essential food commodities.
The retail inflation in July was recorded at 6.93%, and is expected to be even higher in August in the wake of excess rainfall.
And that, Times Now, is why we need to talk about the colossal decline in the nation’s GDP.