oppn parties The Economy: Contraction Slowing, But Real Growth Still A Long Distance Away

News Snippets

  • SP drops two candidates owing allegiance to Azam Khan from Rampur and Moradabad
  • In Assam, a controversy erupted after a picture of UPPL leader Benjamin Basumatary, lying on a stack of Rs 500 notes circulated on social media. UPPL is an ally of the BJP
  • AAP's Jalandhar-West MP Sushil Kumar Rinku joins the BJP. He was the only AAP Lok Sabha MP
  • Supreme Court dismisses Centre's plea to review its 2023 verdict in the PMLA case
  • Close save for passengers as they remain unhurt after the wings of two planes graze at Kolkata airport. Pilots derostered and inquiry ordered by DGCA
  • Bengal BJP leader Dilip Ghosh gets notice from the EC as well as the BJP for making ugly remarks about Mamata Banerjee's parentage
  • Sadanand Vasanth Date, who faught terrorists in the 26/11 attack and was awarded the Preisent's Police medal, has been appointed the head of the NIA
  • Centre will borrow Rs 7.5L cr in the first six months of FY25, nearly 50% of the target for the full year
  • 25 stocks, including SBI, will see same day trade settlements from today in the world's fastest settlement mode in both BSE and NSE
  • Stocks recover smartly on Wednesday: Sensex rises 526 points to 72996 and Nifty 118 points to 22123
  • Tennis: Rohan Bopanna-Matthew Ebden reached the semifinals of the Miami Open
  • IPL: records tumble as SRH beat MI in a high-scoring match. SRH score 277/3 with 18 sixes and Mumbai score 246 with 20 sixes to fall short by 31 runs. Atotal of 38 sixes, highest in an IPL match were hit and both teams combined to score 523 runs, the highest aggregate in an IPL match
  • Amul will launch fresh milk in the US
  • IPL: RCB beat Punjab by 4 wickets as Kohli and Karthik shine with the bat
  • India strongly objected to German foreign office remarks over the arrest of delhi CM Arvind Kejriwal, called it "biased assumptions"
Delhi Lt Governor Vinai Kumar Saxena says government cannot be run from jail, hints at President's Rule in the capital ////// In a dangerous incident, the wings of two planes grazed while taxiing on the runway at Kolkata airport, all passengers were safe but DGCA ordered an inquiry and the pilots were derostered
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The Economy: Contraction Slowing, But Real Growth Still A Long Distance Away

By Sunil Garodia
First publised on 2020-11-28 11:24:56

About the Author

Sunil Garodia Editor-in-Chief of indiacommentary.com. Current Affairs analyst and political commentator.

The Indian economy technically entered a period of recession as it contracted by 7.5 % in the second quarter of 2020-21. Although the decline was lower than expected (most economists had expected a 10% decline while the RBI had put out a figure of 8.6%), still the slump was enough to sound alarm bells. While the government said that the numbers were better than expected and the potential for upsurge was visible, it also sounded a worrying note for a second wave of Covid infections.

But the figures are not so rosy. Except for agriculture, which grew at 3.4% (Q1 3.4%), manufacturing which grew at 0.6% (Q1 -39.3%), and power and gas, which grew at 4.4% (Q1 -7 %), most other sectors continued to show negative growth. Services continued to be heavily in red. Although the rate of contraction was narrowing, yet the sentiment was not improving.

Core sector industries showed a decline of 2.5% as refinery output and steel production declined enormously. The dismal performance of this sector has a huge bearing on the overall industrial data as core sector carries a weight of 40%. Similarly, the services sector has always contributed handsomely to the GDP. It is a sign of the times we live in, where personal contact is avoided, that the services sector is showing continued negative growth. It also means that despite penetration of mobiles and internet, online transactions have not really taken off as expected, which was reflected in financial and professional services declining by a bigger 8.1% in Q2 (Q1 5.3%).

When it is considered that Q2 included the festive season buying, one does not have much hope for Q3 based on these numbers. Demand has not shot up as a whole and the December GST collection figures will give a better picture of which way the economy is headed from here. Although the government talks about having done much through its Covid packages, those were all supply side and lending packages. They have clearly not had the desired effect of boosting demand. Hence, the government should not further delay investments in infrastructure projects. Only then will core sectors show positivity and the whole economy will perk up as a result of that.