Steepest fall of India’s GDP growth rate in 4 decades

India’s GDP (gross domestic product ) contracted 23.9% in the April-June period – much worse than economists’ estimates, official data showed today, as the coronavirus pandemic brought key industries to a halt and rendered millions of people jobless. That marked the worst incidence of negative growth for the economy since 1996, when India began publishing quarterly figures, and also the worst among major Asian economies. 

Steepest fall of India's GDP growth rate in 4 decades, Indian economy,

Early in 2019, India was expected to take over Germany to become the fourth-largest economy in 2026 and Japan to become third-largest in 2034, India in the initial days of 2019 was also expected to reach a GDP of USD 5 trillion by 2026, 2 years later than the government’s target.

But the foggy despair gathered all around the economy has made everyone to question the finance ministry about the maintainability of these promises

Recently, former Reserve Bank governor C Rangarajan, said that at the current growth rate, reaching the USD 5-trillion GDP target by 2024-25 is “simply out of question”.

Also Read: INDIA’S ECONOMY WILL SHRINK THIS YEAR FOR THE FIRST TIME SINCE 1979

Indian economy as of today.

The Indian economy has seen a deceleration of 5% in the last few quarters, as indicated by the world bank before the spread of the deadly COVID-19 and multiple lockdowns in the nation.

Surprisingly the Indian Finance Minister Nirmala Sitharaman puts its all on the so-called ‘Act of God” pandemic. She blamed the act of God for the shortfall in revenue and defended the Centre’s stance of being unable to pay the states GST compensation to the states.

The fact check says that the conditions aren’t much reliable from the short term perspective. Indian GDP slowed to 3.1% in the last quarter of 2019, before the occurrence of the COVID-19 pandemic. And Currently, the union finance ministry is facing a shortfall of 2.35 lakh crore. The loss of revenue is to be measured at an average annual rate of 14 percent from 2017 when the GST entered into effect subsuming 17 other payroll taxes.

Here’s a brief timeline of the downfall in the GDP Indian economy since the deceleration.

2017: The year in the aftermath of demonetization.

2017 began with the economy in foggy chaos of uncertainty. It ended the same way. But for different reasons. A year that began with questions surrounding the economic impact of demonetization ends with questions about the repercussions of the Goods and Services Tax. 

  • The impact started to show up in the ensuing quarters with a downfall of 6.1 % in March 2017 and went to as low as 5.6% in June 2017. 
  •  the Indian economy had started decelerating even before demonetization was announced. After hitting 9.1% in the March 2016 quarter, GDP growth had been on a gradual decline. 
  • Inflation in the country continued to moderate during 2017-18. Consumer Price Index (CPI) based headline inflation averaged 3.3% during the period, which is the lowest in the last six financial years.

2018: When the expectations were high

Most analysts expected the economic growth to pick up in 2018, helped by a global recovery, and a domestic manufacturing rebound.

  • The government was struggling to streamline the GST processes. The two successive shocks reduced economic development in the June quarter to a three-year low of 5.7%. Performance accelerated to 6%. Owing to the restocking of companies that had cut inventory in the run-up to GST, 3% in the September quarter.
  • The price index for gross domestic purchases increased by 1.6% in the fourth quarter, compared with an increase of 1.8% in the third quarter.
  •  The PCE price index increased by 1.5%, compared with an increase of 1.6%. Excluding food and energy prices, the PCE price index increased by 1.7%, compared with an increase of 1.6%.

Overall the conditions showed a stable upcoming economy but unfortunately, the year 2019 proved all the anticipations wrong.

2019: When the destruction began to show.

India’s economy grew at its slowest pace in over six years in the June quarter following a sharp deceleration in consumer demand and tepid investment.

  • The government announced a series of measures as part of its efforts to put growth back on track.
  • Gross domestic product (GDP) grew 5% in the first quarter of FY20, data released by the government, marking the slowest growth since the fourth quarter of FY13. GDP growth was 8% in the year-earlier quarter.
  • The Central Statistics Office had earlier forecast that the economy would grow at 5 percent in 2019-20. In the January-March quarter, GDP grew at 3.1 percent as against 5.7%. 
  • The Indian economy witnessed a downfall in its GDP in the July- Sept quarter. It reduced to 4.5% in the 2nd quarter.
  • The GDP was standing at 3.1% before the imposition of a national lockdown in the fourth quarter.
  • India’s retail price inflation climbed to 6.93 percent year-on-year in July 2020 from an upwardly revised 6.23 percent in the previous month and easily beating market expectations of 6.15% due to disrupted supply chains.

 The nation has been witnessing some serious decline in the stats for the past few years yet this news is unable to take its place between the exaggerated and popular news. 

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