Gross Domestic Product (GDP) is the value of all goods and services produced over a specific period of time within the borders of a country. GDP growth is a good measure of the health of an economy. According to data released by the Ministry of Statistics and Programme Implementation (MOSPI), the GDP growth for India in real terms in the last quarter of FY 2019-20 has declined to 3.1%. For Q1, Q2 and Q3 the numbers were 5.6%, 5.1% and 4.7% respectively. Experts point out that the actual growth in the first three months of the current calendar year, which is Q4 of FY 2019-20 was actually a paltry 1.2%.
After the figures of GDP growth were revised, the new numbers for the four financial quarters of FY 2019-20 became 5.2%, 4.4%, 4.1% and 3.1%. Thus, the aggregate growth for FY 2019-20 was 4.2%. This is the lowest annual GDP growth for India since the last 11 years. The numbers for FY16, FY17, FY18 and FY19 were 8%, 8.3%, 7% and 6.1%. If we do not trust the government-GDP numbers and believe what former Chief Economic Advisor (CEA) – Arvind Subramanian said, when he cast aspersions on our GDP numbers, saying they were inflated to the tune of 2.5%, then the GDP growth for FY 2019-20 will reduce to a mere 1.7%.
PRE-CORONA DOWNFALL
It may be noted that this miserable economic performance cannot be attributed to the Coronavirus pandemic as the lockdown period constitutes only a week to the period under discussion (1 April 2019 till 31 March 2020). Some of the major sectors clocked the following percentage growth rates in the outgoing financial year on year (YOY).
Looking at the numbers, it appears that the neglected agriculture sector and the maligned mining sector have somewhat rescued our economy. Construction and services sector that generates high employment has taken a severe beating. Manufacturing is the negative zone for the last 3 quarters, which is worrisome. The dismal decline in Gross Fixed Capital Formation (GFCF) is in congruence with the downward spike in manufacturing and construction. OECD calls GFCF as ‘investment’ and can be understood as the net increase in fixed capital that includes spending on plant, machinery, and equipment purchases; the construction of roads, railways, private residential dwellings, and commercial and industrial buildings.
Another cause of concern is the breach in fiscal deficit for FY20 from the budgeted 3.8% to 4.6%. This shortfall in tax revenues is bound to affect the ability of the government to offer subsidies and fund its welfare schemes. Moody’s has already downgraded India’s rating from Baa2 to Baa3 with negative outlook. The international premier credit rating agency has cited weak reform implementation, low growth, fiscal slippage and rising stress in the financial sector as the primary reasons for the downgrade.
BLEAK PROSPECTS
Former Finance Secretary Subhash Chandra Garg has painted a very bleak picture of India’s economy for the current financial year 2020-21. According to Garg – “It is certain that India’s GDP will contract after 40 years in 2020-21. It also appears fairly certain that this would be a very large contraction of about 10 per cent of GDP or loss of about Rs 20 lakh crore of income. The nominal fiscal package of Rs 21 lakh crore is actually of only Rs 1.4 – 1.5 lakh crore or about 0.7 per cent of GDP. While the strategy of Government may succeed in not allowing fiscal deficit to expand on account of expenditure stimulus, the big hole on revenue side and off-budget expenditures will make central government fiscal expenditure go beyond 7 per cent in 2020-21. Every factor of production will suffer – the workers most. 2020-21 will go down in the history of India as the year when India got waylaid from its story of three decadal outstanding growth.”
The former Finance Secretary was critical of the Atmanirbhar package, saying – “Total outstanding credit to Micro and Small Enterprises is about Rs 15 lakh crore. A Million-dollar question is whether the banks would really lend to the MSEs. Credit policy is the responsibility of RBI. It is strange that credit package came from the Government. The MSME credit package relies on government guarantees. It is unlikely that the private sector banks would fall for this. It is only the PSBs, which might deliver something under this package. The directed credit with the bait of guarantee might drive the last nail in the coffin of PSBs.”
MODI 2.0 AND POLITICAL OPTICS
Despite the economy being in the doldrums with further prospects appearing quite gloomy amidst the steadily increasing COVID-19 cases, the Modi government and the ruling BJP party celebrated its first year in office after coming back to power with an overwhelming majority in the 2019 polls. The celebrations were a reminder to the people of India that the government feels little remorse at the state of the economy and its complete mismanagement of the pandemic and the hastily announced lockdown. Instead, the government is proud of delivering on electoral promises of scrapping special status to Jammu & Kashmir, passing the Citizenship Amendment Act (CAA) and enacting the triple talaq bill.
The ruling party received the Babri Masjid verdict by the Supreme Court in its favour and the government has set up a trust to build a grand Ram Mandir in Ayodhya. One can debate if they are useful to the cause of strengthening the nation and enhancing communal harmony but it has definitely provided a great opportunity for indulging in political optics and sending a strong message to the BJP’s core voter base about the party’s adherence to and success in achieving the core agenda of ‘Hindutva’.
The main opposition party of India, Congress has blasted the government and called it a “year of disappointment, disastrous management and diabolical pain”. The Congress leadership accused the government of divisive politics saying: “Instead of healing, it is inflicting wounds on the soul of Mother India and its children. National interest has been constantly compromised and sacrificed at the altar of political self-interest.”
IMMUTABLE DIVINE LAW
God keeps a constant watch over the constructive and reformative measures taken by rulers and governments. He also is aware of the havoc and destruction they bring about in the world by way of injustice and wrong policies. Until the time their good deeds outweigh their deeds of destruction and until there is no one else available who is likely to do less destruction, God continues the rule of these people despite all their misdeeds and sins. However, when the balance of their achievements is heavily inclined towards destruction and less towards construction, God removes them from authority and casts them away. In their place, some others are installed to manage the affairs of the world subject to the same inflexible condition. There is no doubt that the clock is ticking for our rulers. Do their good deeds outweigh their unjust deeds and excesses on the people or is it the other way round? Only God has the answer and only time can reveal what is there in store for us. What is important however is to do the noble thing.