Dr. Ashwani Mahajan
According to the data released by the Central Statistical Organization on 31 August 2020, there has been a decline in GDP at the rate of 23.9% in the first quarter of current financial year. This decline in GDP is visible in all sectors of the economy except agriculture. Ever since GDP figures began to be published on quarterly basis, this is the first such occasion, when there has been such a big decline in GDP in any single quarter. However, the figures about decline in GDP are not at all unexpected. All the experts had been expecting such results about this quarter; when the entire country was in lockdown, not only the production centers but Government and non-Government offices were also closed; in hospitals, none other than the corona infected were generally being treated; all Government and non-Government education centers, including tuition centers, were closed; Rail, Metro and all public transport services were stalled, private vehicles were also not allowed to ply; though employment in government and organised private sector were almost secure, however casual employment was almost lost; and as most of the workers migrated back to their villages, the decline in GDP was written on the wall.
Generally, when GDP growth in an economy is affected, its responsibility rests on the economic policies and performance of the Government of that country. But this decline in GDP is not due to the policies of the Government but due to ‘Act of God’. No country would have remained untouched by Corona’s pandemic, however, during this period the decline in economic activity was not uniform in all countries. In India, where the GDP fell by 23.9 percent, the decline in US was 32.9 percent, in UK it was 20.4 percent, in France It was 13.8 percent, in Italy It was 12.4 percent, In Canada it was 12% and in Germany it was 10%. It can be said that India’s GDP decline is less than that of US. But the basic question is, why did India’s GDP fall so drastically during the April-June quarter, while in other countries except in the US, the decline was relatively low? The reason for this is that the lockdown was imposed in India at an early stage of pandemic, whereas, the remaining countries delayed their decision of the lockdown.
The Governments all over the world had two options; one, to save the economy and the other to save the lives of the people. America, European countries, Brazil etc., avoided lockdown to minimise the economic interruption. However, the lockdown was quickly implemented by the Indian Government, realizing that the health facilities in the country were not comparable with the developed world; and we may not be able to deal with pandemic in the event of an outbreak. The developed countries of the world were thinking that since they had the best of health facilities available with them and they were fully capable of dealing with the pandemic, they delayed the implementation of the lockdown. The result is before us. In the US, which has a population of only 33 crore, which is less than a quarter of the population of India, the people suffering from corona infection are more than one and a half times, that is, 63.4 lakhs as compared to 39.3 lakhs of corona infected in India. Similarly, in Brazil with a population of only 213 million, 40.5 lakh people have been infected with Corona. In India, the death rate of people infected with corona is 1.75 percent, while in America it is 3.1 percent, in Brazil it is 3.2 percent, in South Africa it is 2.1 percent. In Italy, it was 13.7 percent. Worst part of the story is that US could not even save its economy. Not only this, instead of the lockdown, the World Health Organization emphasized that more and more testing is the only solution to deal with the corona. India knew that we did not have adequate testing facilities at that time. In such a situation, the government imposed lockdown and in the meanwhile expands hospitalisation facilities, medicines, production of ventilators, PPE kits and testing kits. The Indian Government chose to lockdown at an early stage, while most of the countries in the rest of the world chose that option very late. So while there was a decline in GDP in these countries in the last quarter, this decline started late. But in the meantime they faced outbreak of pandemic and deaths due to the same; and despite having much less health facilities, India ranked among the lowest mortality rate countries in the world, next to Russia.
This recession is temporary
The decline in GDP of the country and the world is short-lived, as the economy is about to return to track after the pandemic ends. The current shortfall in demand will also be made good in the coming times, as pent up demand will compensate the demand post pandemic. We are already seeing green shoots in the economy.
Future is bright
It is difficult to say about the rest of the world, but India has learned a great lesson from this pandemic. According to the Prime Minister, this is the lesson of ‘self reliance’. For the last two decades, our country’s dependence on China was increasing. Due to this our manufacturing was severely affected. Between 2012 and 2015, the growth of our Index of Industrial Production (IIP) had reached near zero.
However, a little improvement has been seen in it in the last few years. But our dependence on China and the rest of the world has been continuing unabated. Country faced huge scarcity of PPE kits, masks, ventilators, testing kits and medical equipment required during the pandemic. However, nation did rise to the occasion and production of these items in the country increased manifold and after meeting our needs, we could even export these products and fulfilled the requirements of other countries as well. This development has instilled a confidence in the country in general and domestic industry in particular. The Government has also resolved that in order to meet the goal of self-reliance in the country, production of raw materials for pharmaceuticals, namely Active Pharmaceutical Ingredients (APIs), electronics, chemicals, toys, metal processing, fertilizers etc. will be increased. Apart from Government assistance in the form of subsidy, finance, marketing etc. all other measures including increase in import duty, anti dumping duty will be adopted. Many companies from the rest of the world which were operating in China have also started migrating to other countries; and many of them are coming to India as well. That is, there are going to be new opportunities for industrial and technology development in the future. It can be said that the current contraction in GDP is a reality; however, the future is bright. But for this the Government, industry and the citizens, all have to make concerted efforts.
(The author is Associate Professor,
PGDAV College, University of Delhi)
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