State of indian economy in 2021 after covid pandemic

It was in 2020 that the indian economy contracted. It shrank for two consecutive quarters. as per the revised statistics issued by the nso, the indian economy contracted by 24.4 in the quarter ended june 2020. In the immediate next quarter it contracted by 7.3 percent.

It means that economy shrank in the quarter ended june 2020 and also in the quarter ended september 2020 and with that the indian economy came into what is called a technical recession.  a technical recession occurs in is a situation when the real gdp of a country falls and contracts for two consecutive successive quarters

This is what happened in our case last year . This recession may have been something new it came in 2020. indian economy has been heading towards the recessionary phase right since 2016.

 from 2016 to 2020 the growth rate of the indian economy has fallen by one percentage point every year such that from a growth rate of 8 in financial year 2016 the Indian economy recorded a growth rate of a very rate of 3 in financial year 2020 .

It continuously fell and got the economy to a major slowdown. This is a recessionary phase which was building in and thus when the technical recession came it was not surprising.

Although technical recession occurred because of a short-term factor which is a lockdown imposed by the government. The economy had been slowing down the economy and had gone extremely lethargic year after year in the last 5 years .

with the lifting of the lock down, the recession the technical recession was supposed to go but what has not gone . It is a  recessionary condition of the indian economy.  The recessionary phase of the condition of the economy ( 2016 to 2020 ) and now onwards is due to worrisome long-term structural defects and deficiencies in the economy.

Those have not yet been attended to change and so even the economy continues to remain extremely slow extremely, lethargic. Economy is not showing signs of reviving in a very durable and strong manner.The economy being in a recessionary phase with a technical recession having set in. covid is impacting a body blow to the growth of the Indian economy, it is contracting.

the government needed to initiate measures such that the economy came out of the technical recession .The econmomy had to go to growth mode. it was a very relieved government that announced a few days ago that the technical recession that Indian economy was into got over in q3 which is the quarter ended december 2020.

as per the nso Figures, the indian economy grew by a mere 0.4 percent but it grew it did not contract in the quarter ended december 2020. With that growth the economy came out of the technical recession that we had got into. So as per pure economics, india is not in the technical recession anymore .

even though the ground reality might be something extremely different with this quarter ended 31st december2020 recording a positive growth rate of a mere 0.4 percent.

with this the government took the opportunity again and it reiterated that indian economy is experiencing a v-shaped recovery which is a shaft falling growth and a sharp uptick in growth again .We dont agree to the government.

 but it gave the government a chance to reiterate that all over again this growth rate of 0.4 Is doubted by many and one of the persons who doubts it is dr subramanyam swamy .Dr swamy says that if some kind of a figure of a guesstimate or an estimate of the negative growth that the msme and the informal sectors have been experiencing in india is taken into account then even for the quarter ended december 2020.

the growth rate is going to be negative and not a positive 0.4 as the government and the nso claims he cites a calculation under the popular passion dice and the last person dies in order to say that for december quarter the growth rate wasa minus10 and not a plus 0.4 percent as the government claims while it’s a matter of debate of what kind of an indice or an index must be taken into account to calculate and see the real state of the indian economy

what we would see is that the real state the real situation the ground reality has not really changed for the common entrepreneur the situation has not undergone any kind of a transformation .

so as to jubilantly say that india is out of a technical recession a recessionary phase continues in the mean while what comes to the aid of the government is yet another data and with that data is the gst gollections of india for february 2021.

 for february 2021as per government figures  gst collections were to the tune of 1.13lakh crores in the month of february and that means gst collections have crossed one lakh growth per month for the past five months .

with this the government likes to cite that growth is back revival is back recovery is back as far as we are concerned we think that let truth not be lost in jargons and inindices and calculation that people may want to do technicalities need to be kept aside.

 Let  us look at certain positives and negatives of Indian economy in 2021 after covid 2019 lockdown that are being announced by way of data that keeps emanating from the economy and with the help of analyzing what we call the positives and the negatives.

let us see whether some kind of a durable growth has set in the economy ,whether the economy’s growth has stabilized or not.

let’s have a look at the positives of Indian economy IN 2021

the first one is the government data says that in the quarter ended december 2020,we have stopped a contracting . economy growth has set in even though it is a mere 0.4 percent and well if you go by the government’s claim we are witnessing a v-shaped recovery .

The second positive is the gst collections of february that the government cites which is collections in February alone have now again crossed one lakh crores a month and that’s now been so for five consecutive months implying the demand is back and growth has set in

The third positive that the government would like to cite is food grain production. the agriculture economy has been doing very well because of record production of food grains this year . the food grains are expected to touch a record production of 303 million tons which means the rural economy is expected to be very strong and demand should build up

 The fourth positive is export orders. exports has been expanding in the last couple of months . export orders have been buoyant .exports have picked up even though we are now seeing that the pace of growth and export orders has again slowed down .but let’s for the moment agree that exports have been on the growth side.

 the Fifth positive is corporate profits .

corporate profits have been doing good they have been doing it because of a cost control that has taken place but again for the sake of record corporate balance sheets have improved because of profitability and business confidence has come back in some form or the other.

 the next positive that goes is the reserve bank .the reserve bank says that the indian economy has turned some corner and that things are looking up . the last significant positive is that in the month of February india’s manufacturing sector recorded the fastest demand for inputs . It is basically showing that manufacturing sector believes that demand will come back and that it has started building its inventories all over again .T hese are the positives that the government would like to cite to say that growth has come back in a durable manner .

let’s now look at the negatives of indian economy in 2021.

 the first and most important one job growth is not coming back job numbers have fallen for the 11th consecutive month in the month of February. the second negative the core sector the core sector which consists of 8 critical industries remains subdued and has been in a negative territory month after month .

the second negative factor is inflation, inflation has risen to a 32 month high and core inflation which consists of manufacturing goods  and other services remains remains untamed . the next negative about indian economy is manufacturing growth , Grwoth in the month of February actually dipped it did not go up . This is despite the fact that gst collections may have gone up but growth in the manufacturing sector has dipped in the month of February .

Fourth negative is that credit to the big industries to the infrastructure sector has dipped .they are not borrowing , they do not see the need to borrow perhaps because demand is not there.

The next negative is that the msme and the informal sectors, which are labor intensive sectors, have been in pain .They have been struggling despite all the government measures that have been initiated .

the sixth negative othat credit to the corporate sector has been falling  and that’s been happening because fresh investments by the corporate sector into new projects has been completely on the back burner. the Second last negative news on indian ecoconomy are consumer demand remains sluggish it has not come back .

The last negative aspect of indian economy is NPAs in the banking and non-banking financial sector. they have been rising at a rapid pace these were the negatives which are also coming out when we look at the positives which have been comingou tthat’s the situation of the indianeconomy today .

what is the reality of the economy in 2021

The reality of economy according to us is that these conflicting signals should not confuse us. Lets focus on three critical factors .

The  fresh investments are coming back in the economy .

if fresh investments are coming back,it means demand has come back, people are spending, industry capacity needs to be increased and therefore investments are being made. Fresh investments have not come back. They are languishing .the private sector is unmoved and is not willing to risk its capital.

The next sign that comes is jobs. jobs are not coming back ,they have dipped for the 11th consecutive month because investments did not come, jobs have not been coming .

third and most important factor which is Consumer demand. Consumer demand continues to lag behind, completely subdued. Until that doesn’t change, there’s going to be no durable growth. There’s going to be no stability in the economy that is so badly needed by us. There are some positives. The economy is trying to go up as india has a huge captive demand coming from its population but that has not been enough we are not witnessing a durable growth .

We will say that durable growth has come in we will say that the economy has stabilized only when investments are back, jobs are back and consumer demand is back .