Economic activity in India is taking major hits, thanks to the ongoing COVID-19 pandemic. Businesses and industries have remained shut for over 2 months amidst the nationwide lockdown. Though restrictions like those on domestic travel have been eased, the economy is struggling.
India may stare right in the face of the worst economic recession period since Independence.
India’s GDP is set to witness a massive fall and contract by close to 5% this year. The first quarter of FY21 will also witness a massive 25% contraction. Hopes of going back to the pre-pandemic growth rates are bleak. It is also unlikely that in the next 3-4 fiscals GDP growth recorded will prove substantial. In addition, Crisil estimates a 10% permanent loss to the country’s GDP.
Thus, unfortunately, one can easily say that India is expecting a crippling economic recession. Reports say that since Crisil’s last growth predictions, things have only declined.
In 69 years, India has witnessed recession only thrice. In the years 1958, 1966 and 1980, the reasons were the same each time- a monsoon shock that disrupted agriculture.
However, the imminent recession, the fourth since independence, the first since liberalization, is perhaps the worst to date.
The reasons for this are three-fold: first, agriculture, in 2020-21 may soften the blow, assuming a good monsoon. Second, Lockdowns 1.0-4.0 have severely affected most non-agricultural sectors. Third, the simultaneous global economic disruption has affected India’s opportunities on the exports front.
Another important reason is the recent AatmaNirbhar package of Rs 20 lakh crores lacks muscle to aid the economy.
Thus, all we can do is hope for good monsoons so agriculture can soften blows on India’s struggling economy.