Rating agency ICRA on Monday projected Q4 GDP growth at 2%. Earlier NSO projected a double-dip contraction can be avoided now according to agencies projection. The agency has also projected full years contraction at 8.45 percent.
Economist earlier projected recession at the end of the year due to the second wave of the COVID19 pandemic. A recession is a macroeconomic term that refers to a significant decline in general economic activity in a designated region. In India, overall economic activity was declined after lockdown by many states during the second wave of the COVID19 Pandemic.
Recession increases unemployment, investment in the country, and also income and wages of small and marginal groups reduces. It also has a long-term impact on the economy and hampers the growth of all future generations. Per Capita income of our country has already gone down than Bangladesh. Bangladesh’s per capita income is now $280 higher than India’s $1,947. Already after the COVID19 first wave, India’s GDP was contracted by 23.9 percent in the first quarter of 2020-21 financial year.
One more recession in 2021 would have created huge distress in the Indian economy. Also after the recession in any country credit rating agencies will rating for the investment as a country will go down, this will result in less foreign direct investment in the country. After the recession movement of money from one hand to another hand stops and the country gets stuck into that cycle. It needs huge packages to boost the economy again and it’s not possible for a country like India. Other countries declared packages up to 10 to 20 percent of their economy after the COVID19 pandemic. This year American President Joe Biden signed a package of $1.9 Trillion. Though India also declared a package of 20 lac crore last year still actual benefit was only 1.80 lac crores according to economists. The Indian government couldn’t give any more packages mainly because it does not have any such reserve funds like other countries and also because it’s a developing economy.
After the demonetization Indian economy lost around two lac crores Rs. It also started a slowdown in the economy. That was the year when the growth of India could have been more than 8% after many years. This slowdown was continued till next year and then GST was implemented. There were more than 200 amendments in GST which put many business activities on hold. Especially small and medium businessmen had to incur losses due to the critical structure of GST. Then COVID19 Pandemic came with a huge avoidable economic distress. The Indian economy was already going through a back to back slowdowns or recessions for the last three years. Hence one more recession will not have been tolerated by it.
So projection ICRA is a good sign of revival of the Indian economy. It will help the country keep the investor’s hope high at least till the year-end. If India prepares for the third wave very early and starts with the huge vaccination drive it can fight with it. The country also needs to focus on reducing many state-wise lockdowns. Almost all the states are under lockdown for the last whole month. Strategic lockdowns only into those areas where the number of cases is high can be useful to a country like India. Complete lockdown in every state may again put the country in slowdown or recession. As per the expert’s advice also country should focus more on mass vaccination rather than back-to-back advice. If we want to revive our economy country needs to focus on strategic planning and procurement of more vaccination. Also after the third wave if India put many lockdowns again projection by ICRA about recession may not come true.
By Anirudha Yerunkar
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