- Following the trend of the first quarter where the GDP contracted by 23.9 percent in the first quarter of the financial year 2020-21, an unheard-of statistic till then, the second quarter GDP statistics released also shows contraction to the tune of 7.5 percent. Though the RBI had forecast contraction at 9.8 percent, the latest data shows promising green shoots in the economy has beaten the expected downturn by quite an impressive margin. Trend portends favorable expectations in the remaining two quarters for sure.
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- However, the fact of the matter is the economy continues to remain in bad shape as two successive contractions have officially announced the arrival of a recession that does not augur well for the country in the foreseeable future. An optimistic view of the economy picking up eventually should not be camouflaging the harsh reality of challenges staring at us presently. Successive years of economic slowdown, two years to be precise, witnessed before the pandemic has had an equally debilitating impact that has only been exacerbated by the contraction now.
- It’s no brainer to acknowledge the importance of the strength of private consumption denoting the economic indicator as to the largest component of GDP and alarmingly, it fell in the second quarter by 11.3 percent to Rs. 17.96 lakh crore as per the Statistics released. Mirroring the prevalent situation about the purchasing power of consumers further asserts the stress on the economic front. The only silver lining visible amidst the mayhem witnessed is the largely unaffected agriculture sector escaping the damage so far.
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- Therefore, it is imperative the government address anxiety over agricultural reforms before the marauding damages extend to this sector as well. No denying the fact that the Union Government has initiated honest efforts on pending reforms in some of the factor markets viz. labor and has announced stimulus packages to encourage the crucial manufacturing competitiveness as well. Ensuring the removal of bottlenecks restraining the supply side of the economy is the very purpose of introducing these reforms/stimulus packages.
- All these measures are aimed at catalyzing the private investment to set off a virtuous cycle although a significant part will be influenced by the strength of domestic demand. Atmanirbhar Bharat spelled out so passionately by the Prime Minister exhorted greater focus on domestic demand as one of the crucial kegs in reviving the economic progression by prioritizing the consumption pattern. As anyone with common knowledge would vouch, there is no better way than focusing on the execution of existing infrastructure projects to address the current economic challenges adroitly.
- The Union Government faces an onerous task is stating the obvious, nonetheless is expected to steer the country’s economic roadmap in the right direction without resorting to populist and unyielding measures. The need of the hour is to embrace pragmatic, reformist, and inspired measures so that the tottering economy assumes stability and subsequently commences delivering on expected lines.
