How is India recovering from the economic slowdown?
The pandemic situation caused by the spread of coronavirus is slowly but hopefully getting better. The deadly virus has claimed the lives of lakhs of people across the globe and crores of people are under the effect of it.
To curb the spread, countries went on to impose nationwide lockdowns. Cities were shut completely, there was no movement for months. People were stranded at their homes and even economic activities were also completely halted. This was a massive blow for every segment of people, from daily wage laborers to the corporate people.
The effect of this was reflected in the numbers when the government released the data on GDP for Q1 of the FY 2020–21. India hit the lowest GDP numbers of the last four decades. The numbers showed a contraction of 23.9% in the first quarter ( Read the blog What does the 24% shrink in India’s GDP mean?). Different reasons were being guessed behind this contraction but the pandemic was the major one to be blamed for this. It was not just India that witnessed a contraction, the top economies like the United States, UK, Japan were also among the severely hit nations.
Now, India has crossed the second quarter and has entered the third quarter already, we may see the recovery phase. The GDP numbers will be released later this month. So, in this blog, we will be talking about the possible ways in which India is recovering from the major blow. We will try to understand the recoveries in particular sectors.
What is economic growth and its key drivers?
To better understand the recovery phase, we must know about the economic growth and the contributors to economic growth. There are two ways to understand economic growth. Put in simpler terms, economic growth is an increase in the production of goods and services over a period. The growth comes from aggregate gains in production.
Higher economic growth means an increase in income, inspiring consumers to spend more eventually leading to a higher material quality of life or standard of living.
From the economist's point of view, growth is commonly modeled as a function of physical capital, human capital, labor force, and technology. This means that to achieve economic growth the quantity and quality of the working-age population, the tools that they have to work with, and the recipes that they have available to combine labor, capital, and raw materials should be increased.
Now, having understood what economic growth is, we should now look at the contributors in brief:
- Physical capital
- Human Capital
- Technology
- Labor force
“Technological innovation is indeed important to economic growth and the enhancement of human possibilities.”
- Leon Kass, American Physician
So, these were the most important contributors to economic growth. There are others but they all somehow fall under these four key drivers of any economy. Moving further in the blog, we should now look at the recoveries in different areas that will cut the negative growth recorded in the first quarter.
Referred Blog: COVID-19 impact on Financial Markets
“No one is saying that this is the end of the stimulus or that we have exhausted all our options. If any sector requires help at any point in time, we will intervene. We are in consultations with various business groups, CII, Ficci, and various MSME groups and we have been getting various suggestions. We will come out with measures. As we have done in the last seven months, we will intervene at the right time and we will ensure that we will do everything possible and in the best interests of everyone,”
- Ajay Bhushan Pandey, Revenue Secretary, India
How is India recovering?
The month of November has brought some good news with it. Indian economy seems to be recovering from the major blow in the first quarter and it is healing at a faster rate than it was anticipated. Some top news related to economic growth came in the first week of November.
To read the complete blog, click on the link.
