JOIN USThe poor GDP growth estimates for the country for the January-March quarter and for the past financial year were not unexpected as the economy was already sliding before the Covid-19 pandemic struck and there were no signs of recovery. The figures released by the National Statistical Organisation (NSO) show that the GDP for the quarter and the fiscal grew just by 3.1% and 4.2% respectively, which were the slowest rates in the past 11 years. The government has said that the estimates were affected by data flow problems during the lockdown period, but the picture may not change much even with the receipt of full data. The Gross Value Added (GVA) figures for the quarter and the full year are low, and thus the low growth numbers. All indicators have persistently declined, belying claims that had then been made that the slowdown had been arrested. Some economists have even questioned the numbers and said they might actually be even lower.
The estimates were for a period before the national lockdown and the situation has only worsened since then. All important sectors of the economy, including manufacturing, construction and services, contracted considerably, resulting in fall in output and job losses. Others like trade, transport and communications also showed clear declines. Hotels and tourism were affected. Only agriculture and government spending gave some strength to the economy. Private consumption, which is the main driver of the economy, declined and investment activity slowed down for the third consecutive quarter. While this is a bad scenario, it should be worse in the subsequent months because the lockdown has dealt a severe blow to all sectors of the economy. Some available indications only confirm these fears. The Index of Industrial Production (IIP) for eight core sectors has shown a 38% decline in April, and all the sectors contracted. Exports declined by 60% in that month. There were signs of resumption of activity in some sectors in May, with the easing of the lockdown in some areas. But the economically important states and cities are in dire straits.
So the outlook for the rest of the year is grim, with predictions of a negative growth for the economy. The packages announced by the government till now, including the sops approved by the cabinet on Monday, are considered too little and too late. Some of them are policies which may yield results, but only over time. Prime Minister Narendra Modi has said that growth will be back on track, but the present indications are that the distress will continue for months.