Even as the effect of the current prolonged slowdown seemed to moderate and the green shoots of revival slightly appeared on various economic parameters, the revival in the economy is farther than it appears.
India’s economy took another blow in the third quarter of the current fiscal and grew at a mere 4.7 per cent on-year, which is slower than the revised estimates of the previous quarters. The fall in the GDP growth rate in Q3 has dragged the Indian economy to a 7-year low now. Even as the effect of the current prolonged slowdown seemed to moderate and the green shoots of revival slightly appeared on various economic parameters, the revival in the economy is farther than it appears. In the first quarter of the current fiscal, the GDP grew at 5.6 per cent, decreasing to 5.1 per cent in the second quarter, according to the government’s revised estimates.
After the slowdown became prominently visible on the economy, the government rolled out various measures to curb further damage. Finance Minister Nirmala Sitharaman announced many decisions such as bank recapitalisation, cut in corporate tax rate, etc to boost demand and consumption in the economy but the results are awaited as the economic data is still pessimistic.
A major shock has been felt by the manufacturing sector, which Prime Minister Narendra Modi had projected as the key area to make India a global leader. The sector contracted for the second straight quarter in Q3 FY20. The growth of the manufacturing sector becomes important as apart from the profits and businesses, it generates the maximum number of jobs. However, continuing the contraction streak, the manufacturing GVA again shrank by 0.2 per cent, according to MOSPI. The manufacturing GDP growth has been severely hit since the beginning of the current fiscal.
At a time when the economy is already struggling with low growth rate, the Coronavirus epidemic has come as a double-edged sword. With the increasing number of cases being discovered in recent times, the global effect of the virus and the lag effect is still underway.
Disclaimer: An earlier version of the story reported older figures of Q1 & Q2; it has been updated on the basis of revised estimates released by the government.