Bikky Khosla | 02 Jun, 2020
GDP growth rate fell to 3.1 percent in the last quarter of FY 2019-20 against
5.7 percent rise reported for the like period of the previous fiscal, resulting
in 4.2 percent fall in overall growth for the whole fiscal, from 6.1 percent in
FY19. Last year, the economy faced several challenges, and now the latest
figures indicate that India has entered the Coronavirus crisis with multiple
wounds, and the worst is yet to come amid the COVID-19 lockdown beginning the
last week of March 2020.
deeper look into the data shows that the manufacturing sector
contracted by 1.4 percent in the fourth quarter, from 2.1 percent expansion a
year ago. This is the third straight quarterly contraction registered by the
sector. Similarly, the construction sector contracted
2.2 percent from 6 percent expansion earlier. Other sectors, such as
electricity, gas, water supply and other utility services segment and trade,
hotel, transport, communication and services segment also contracted.
Meanwhile, core sector
data for April 2020 shows a massive 38 percent decline. All
the eight core industries contracted, led by a massive decline in cement and
steel production. Then again, the latest IHS Markit India Manufacturing PMI
index points to a substantial decline in the manufacturing sector in the month
of May. This is the second
month of decline in a row, which is, no doubt, due
to lower production during the lockdown period.
the latest GDP data as well as other data sets indicate that our macro number are
likely to get uglier in first quarter of the current financial year. The full effect of the lockdown is yet to manifest, and some economy watchers view that GDP may contract by a
massive 45 percent in the June quarter. Therefore, the economy
at this juncture, needs more government support. The economic package announced
recently was well and good, but it seems the need of the time is a direct
fiscal stimulus rather than a roundabout way to giving relief.
I invite your opinions.