Editorial

Economy on tailspin

By Nagaland Post | Publish Date: 8/7/2020 1:10:27 PM IST

 Even before coronavirus, India’s economy was slowing down with GDP growth at 4.2% despite the government’s hoopla that the economy will bounce back with a bang to propel India towards achieving a $ 5 trillion economy or Rs. 37,51,93,25,00,00,000 economy. Right now, Modi could miss that target, just like his promise to create 10 million jobs a year during his first term. India had a fiscal deficit 4.6% higher than the one it inherited six years ago. The sequence of quarterly GDP growth numbers leading up to that point tells a clear story: 7% growth shrunk to 6.2%, then to 5.6%, 5.7%, 4.4% and finally 3.1% in the quarter that ended with the lockdown. While everyone now has accepted the inevitable, that the GDP will contract in the current financial year (2020- 2021), the estimates vary. The World Bank pegs it at 3.2 per cent while Crisil puts it at 5 per cent. However, the government controlled RBI survey paints the rosiest picture saying that the economy will contract by only 1.5 per cent. Investment shrank by almost 3% over the year. The investment crisis and India’s large debt pile have the same cause: a government that thinks its own spending is what will fuel economic growth. According to official statistics, government spending increased by 12% last year, more than twice the growth rate of private consumption. The spending this period is not about revenue but a one-way street for COVID-19. The Indian economy was already in a bad shape, reeling under the long-term effects of Demonetisation and a hasty implementation of an ill-conceived GST plan. COVID-19 came as the proverbial Black Swan to hammer the nails into India’s economic engine. The government’s GST collections in April 2020 has been found to be 15 per cent of what it was in the same month last year. With low demand and output, corporate tax will fall. With loss of jobs and pay cuts, so will Income Tax. In such a situation, monetisation will remain the only way. India is no longer staring at a recession but a ‘depression’ and this could even push the government in finding it difficult to pay salaries. According to economists, The Indian economy is in a tailspin and India may actually be looking at something worse than a recession. India has never faced a sustained long-term downturn in economic activity in its 73 years of existence as an independent country. But there is now every possibility that India is looking at a ‘depression’ for the first time in its history, a possibility flagged by several economists. The size of the Indian economy could slump from Rs.200 lakh Crore to Rs. 130 lakh Crore. Economists who are independent of government influences have said that as things stand, and the government retains the 2020-21 expenditure budget for 2021-22 as well, it is likely that 2021-22 will witness a negative GDP growth rate of -8.8%. There is no option for the government but to take heed to the advocates of wage-led growth and do what is needed in this critical period. Statistics of the economy do reveal the truth that alibis cannot work for ever and certainly not with economists and analysts who understand the lies behind the jingoism.

Launched on December 3,1990. Nagaland Post is the first and highest circulated newspaper of Nagaland state. Nagaland Post is also the first newspaper in Nagaland to be published in multi-colour.

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