Indian Economy 2020

Today, India is the third most affected country in the world by the pandemic. Being a developing country where the level of informalities are high, commodities and tourism are the major sources of foreign exchange, and fiscal space has been clasped by debt, India faced great economic and social damage as the country imposed a nationwide lockdown in late March and extended it several times, halting most economic activities.

India’s Gross Domestic Product (GDP) for the April-June quarter slipped by a sharp 23.9%, as per provisional estimates released by the Ministry of Statistics and Programme Implementation (MoSPI). In total, the gross domestic output has fallen by about 20% since the end of 2019- 20.

According to the government data, the gross value added (GVA) at basic prices at constant terms during the June quarter shrunk 22.8%. The GVA at Basic Price at Current Prices slipped 20.6% in Q1.

The thrift shrank 23.9% year-on-year in the second quarter of 2020, fatal than market forecasts of an 18.3% drop. The recede is nearly 24% compared with the same period last year. The contraction is the country’s biggest in decades and the worst second-quarter decline among the world’s top five economies.

As per the data by the National Statistical Office (NSO), all key sectors witnessed contractions with:

Construction   -50.3%
Hotels and Transportation   -47%
Manufacturing   -39.3%
Mining and quarrying   -23.3%
Finance, Real Estate, and Business Services   -5.3%
Utilities   -7%
Agriculture, Forestry and Fishing   +3.4%

Gross fixed capital formation   -47.1%
Private spending   -26.7%
Inventories   -20.8%
Exports   -19.8%
Imports   -40.4%.
Government consumption   +16.4%

(Government consumption jumped because of the implementation of relief measures to help curb the impact of the pandemic).

India, the world’s fastest-growing economy as recently as 2018, was already weakening, the result of a credit slowdown and the spiraling pandemic, when new distress adds on. Employment isn't expected to fully recover and income gaps to widen. Millions of people are and will be pushed into extreme poverty, facing even serious issues like food insecurity.

Owing to the disruptions caused by the COVID-19 pandemic, the Indian economy is forecast to contract by 5.9% in 2020, read the Trade and Development Report 2020 by U.N. Conference on Trade and Development (UNCTAD). Warning that while India’s GDP growth in 2021 in line with the growth rates of the economy rebounds, the contraction is likely to translate into a permanent income loss.

The 2021 recovery will be inconsistent within and across countries and volatility will persist, added the study, cautioning that unemployment will be on an upward trend, more and more businesses will face the threat of bankruptcy; supply chain fragility; confidence will be shaken and demand will be weak.

"As domestic activity contracts, the trade will decrease by around one-fifth this year, foreign direct investment flows will plunge by as much as 40%, and remittances will decline by more than $100 billion," assesses the UNCTAD report, painting a bleak picture something equivalent of a complete breakdown of the Indian economy.