On 31 July, the National Statistical Office under the Ministry of Statistics and Programme Implementation released the GDP (Gross Domestic Product) estimates for the first quarter (April- June) for the current financial year. Although most people had expected India’s GDP to slow down and even contract (contraction not exceeding 20 per cent) due to COVID-19, the reported 23.9 (~24) per cent has truly come as a shocker. This has been the lowest growth rate since India started reporting quarterly data in 1996. The data shows that in gross value-added terms, the economy has contracted by 22 per cent.
The Express explains that this implies that the total value of goods and services produced in India in April, May, and June this year is 24 per cent less than the total value of goods and services produced in India in the same three months last year.
It’s noteworthy that until now, the Indian economy had been reporting an average GDP growth of 7 per cent since economic liberalisation in the early 1990s. However, this year, in a complete roundabout, it has contracted instead. This has been reported as the sharpest GDP contraction amongst the top-20 global economies so far, post the COVID-19 run.
Meanwhile, the biggest resultant blow could be felt in the employment rate which is already at a four-decade low. Business Today reports, “The latest unemployment rate jumped to nine-week high, with the urban and rural unemployment rate rising to 9.61 per cent and 8.86 per cent, respectively.” The GDP situation is expected to worsen the employment crisis even further, thus casting an impact on other facets of people’s lives including health and quality of life.
Labour economist and professor at XLRI Jamshedpur K.R. Shyam Sundar explains that following a reverse migration on account of COVID-19, which has left several highly-skilled people unemployed, economic adjustments via scheme jobs like national employment guarantee scheme will also not be able to solve employment problems on account of the wage and skill mismatch for the workers.
For an economy like ours which has lakhs of people joining the labour force every month, the combined effect of GDP downfall, reverse migration, and absence of jobs in sectors like construction, trade, hotels and hospitality, and manufacturing, which account for the largest employment-providing sectors in India across skill-levels, this will only result in exacerbated levels of stress.
While the COVID pandemic and the resultant mandatory lockdown has had a major role to play, the Express posits that unlike developed economies that have reported a similar shrink, India’s developing economy didn’t have the wherewithal to face the COVID-induced economic crisis. Reports state that India’s economy had been slowing down even before the pandemic and we had closed the previous financial year with a mere growth of 4%. Joydeep Baruah, an economist with the Guwahati-based Omeo Kumar Das Institute of Social Change and Development, told Scroll, “the Indian economy was in the middle of a continuous two-year recession when COVID struck.”
What’s more worrying is that as the report also suggests, the data is not complete and it is expected that when the estimates are revised with better-quality data, the numbers will further worsen. For now, the report states that “usual data sources were substituted by alternatives like GST, interactions with professional bodies etc. and which were clearly limited.” The data also does not include the estimates generated by the informal sector into account which accounts for roughly half of India’s GDP and 80-90 per cent of the workforce.
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