# RanchiMall Content Collaboration Output

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Why Is Indian GDP the most affected?

India is considered as one of the fastest developing country in the world. In middle of the pandemic Covid-19, well developed country's economy has got affected. And India's condition is no different. Gross Domestic Product, it is final value of the goods and services produced within the geographic boundaries of a country during a specified period of time normally a year. GDP has shrinked by 23.9% for the April to June quarter. In gross value added terms, the economy has shrinked upto 22.8.%. India has never encountered economic shrinkage in at least four decades. This is the first ever occurrence of retarding growth since 1996 when the country started publishing quarterly GDP data. The government's chief economic advisor allocated the declination to "exogenous factors" owing to the Covid-19 pandemic and the emergence of lockdown. Thereafter, stunted economic growth of countries around the globe. The rigid lockdown in India resulted in a huge loss among various sectors and detained economic activities.

Measures being taken by the government

Covid-19 pandemic resulted to various phases of lockdown in India, which ultimately led to loss of jobs which affected Indian economy. In the fourth phase of lockdown government opened liquor shop to cover the loss. As in liquors, there is a high margin of tax that government gets. The managing director of State Bank of India Dinesh Khara said, slowdown in the the Indian economy has been undersurfaced and measures taken by the government in recent budget to improve capacity to spend in rural sector, creating infrastructure, inviting foreign Investments will boost growth. He mentioned that several initiatives and measures have been taken by the government to attract investments into the economy, including reduction in tax rates, terming it a “landmark decision” that will go a long way in attracting investment from overseas. Moreover he highlighted the need of growth through savings and investments. If the economy has to grow at 10 to 11% then the investment rate has to be about 40%. There is a need for attracting investment from overseas, infrastructure sector is another area where there is a lot of opportunity and felt need in the economy to encourage this sector. One of the important measures taken by the government in the recent budget was to support the infrastructure sector and to invite Investments from the sovereign wealth funds and interest income of these funds will be tax free. Also, there has been a limpid focus on upgrading the capacity to spend for the rural sector on infrastructure creation and inviting foreign investment for achieving the outcomes which are being deliberated.

How likely is the V-shaped recovery

In a monthly economic report for August, the Finance ministry said that the GDP shrinkage of India by 23.9 % in the April-June quarter. The chief economic advisor to the finance Minister Mr Krishnamurti Subramaniam suggested, "A V-shaped recovery is possible if a vaccine is developed". He even added that if the vaccine comes in the second half of the year recovery of the economy can anticipate in the second half. In the absence of vaccine the recovery will have to wait for the next year. A V-shaped recovery describes the charted course of a sharp economic slowdown with a fast recovery in growth. For instance, the 2020 Covid economic crisis may result in a V shaped recession. If so, the economy would recover in months rather than years perhaps as fast as it plunged in the second quarter. Further, Subramanian said that India is witnessing a V-shaped recovery as the economy unlocks after the Covid-19 emergence lockdown. He mentioned "The April-June quarter (Q1) especially was a time when the Global and Indian economy was in lockdown with several restrictions on economic activity and this is not entirely unexpected. In terms of outlook going forward, we have been witnessing a V-shaped recovery as the economy has been unlocked and a few sectors clearly demonstrate that.

What should the Government do

The former governor of Reserve Bank of India Raghuram Rajan said that the 23.9% contraction in GDP growth numbers for the first quarter of the financial year 2020-21 "should alarm us all" and the government and its bureaucrats need to be "frightened out of their complacency" and into meaningful activity. He further said that the 23.9% shrinkage in India, presumably be worse when estimates of the vandalization in the informal sector come out, compares with a drop of 12.4% in Italy and 9.5 % in the United States-two of the most Covid-19 affected advanced countries. He further explains that if you think of the economy as a patient, relief is the nourishment which patient needs while being on the sickbed and fighting the disease. Without relief, household skip meals, pull their children out of school and send them to work or beg, pledge their gold to borrow, let EMIs rent outstanding payment pile up. Similarly, without relief small and medium firms, for instance, a small restaurant where they stop paying workers, let debt pile up, or close permanently. Furthermore, he said that instead of claiming there is a V-shaped recovery round the corner, they should wonder why United States despite spending over 20% of the GDP in fiscal and credit relief measures is still worried the economy will not return to pre-pandemic GDP levels by the end of 2021. He noted how Brazil has spent loftily on relief, is seeing a much lower downgrade to medium term growth than India. "So government officials to hold out the possibility of a stimulus when India finally contains the virus are underestimating the damage from a more shrunken and scarred economy at that point."

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