The government on Monday put a brave face on the worst-ever crash in the country’s gross domestic product (GDP) for the first quarter of 2020-21, saying that it was along expected lines given the higher stringency with which the lockdown was imposed in the country.
Pointing out that this is the worst global recession since 1870, Chief Economic Adviser (CEA) K V Subramanian said “what we were going through is a one-and-a-half century event”, but took solace from the improvements in some economic fundamentals in August.
The GDP for April to July this year fell by a massive 23.9 per cent as compared to the same period last year with a 3.5 per cent growth in the agriculture sector being the saving grace.
The index of eight core industries fell by 20.5 per cent for April to July 2019 as compared to the same period last year. The group of eight—coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity comprise 40.27 per cent of the index of industrial production.
The fiscal deficit was also going out of hand. In April-July, it was at Rs 8.21 lakh crore because the total receipts were only 2.32 lakh crore whereas the expenditure was Rs 10.54 lakh crore. Last year fiscal deficit for the same period was Rs 5.47 lakh crore.
Chief Economic Adviser (CEA) K V Subramanian sought to give an upbeat scenario by claiming that India was beginning to experience a “V” shaped recovery. For instance core sector growth had fallen to 38 per cent in April but the decline was progressively reduced to 22 per cent in May, 13 per cent in June and 9.6 per cent in July. “Output is clearly showing a V-shape recovery,” he said.
The CEA also pointed out that railway freight in July was at 95 per cent of July 2019 levels and it was 6 per cent higher in the first 26 days of August this year as compared to the same period last year. Similarly, e-way bills, which capture inter-state trade, in August have nearly climbed to last August levels.
Agriculture is one sector that has grown at a healthy 3.4 per cent. “This is reflective of the several reform measures announced by the government. Higher rate of inflation in rural areas as compared to urban captures the fact that rural demand is picking up,” inferred Subramanian.
The government said the April to July economic performance was primarily due to an exogenous shock that has been felt globally.
Subramanian claimed that India had performed better than the UK, a similar-sized economy, despite a more stringent lockdown. The contraction in the UK economy was 22 per cent despite the fact that its lockdown was 15 per cent less stringent than that imposed by India. “Given the higher intensity of lockdown, the GDP results are along expected lines,” he observed.
