India’s GDP decline of 23.9% for the June 2020 quarter stirred a hornet’s nest, with questions raised on the need for a stringent lockdown in the first place. Well, the truth of the matter is, without a strict lockdown in March this year, the damage to human capital would have been far higher. Countries which did not enforce a harsh lockdown initially have not only suffered a GDP contraction but also lost precious human lives in bigger numbers. While the media has been harping about India having the second-highest Covid cases globally, what it fails to mention is that India has amongst the lowest deaths per million, at just 56. The comparable numbers per million are 596 for the US, 613 for Brazil, 612 for the UK, and 473 for Russia.
As for the GDP drop, India is not alone. While the US reported a staggering 32.9% annualised crash in GDP growth for the June quarter, the comparable fall was 42.9% for Singapore, a decline of 38.7% for Canada, a 12.1% fall for Eurozone, a 10.1% drop for Germany, a steep contraction of 20.4% for the UK and of course, a massive plunge of 27.8%, in the case of Japan. In India’s case, we at least had a bright spot with the agriculture sector, which accounts for over 50% of the workforce, growing by a healthy 3.4% in the aforesaid quarter.
Another fact that deserves attention is the GDP data pertaining to March 2020 quarter. Much before the global pandemic struck, while India’s GDP grew at only 3.1%, what has to be acknowledged is that we were the only big economy to report positive growth in the March quarter, with agriculture growing by a credible 5.9%. Other economies like the US, for example, had contracted by 4.8%, Germany by 2.2%, Eurozone by 3.8%, and China actually saw a steep GDP fall of 6.8% in the March quarter. Goldman Sachs has predicted a sharp 27.1% rise in India’s GDP in the June quarter next year, with overall estimated GDP growth of a noteworthy 15.7% for FY22, while Fitch says that India’s GDP growth in 2021-22 will be a good 11%.
Another fact that deserves attention is the GDP data pertaining to March 2020 quarter. Much before the global pandemic struck, while India’s GDP grew at only 3.1%, what has to be acknowledged is that we were the only big economy to report positive growth in the March quarter, with agriculture growing by a credible 5.9%. Other economies like the US, for example, had contracted by 4.8%, Germany by 2.2%, Eurozone by 3.8%, and China actually saw a steep GDP fall of 6.8% in the March quarter. Goldman Sachs has predicted a sharp 27.1% rise in India’s GDP in the June quarter next year, with overall estimated GDP growth of a noteworthy 15.7% for FY22, while Fitch says that India’s GDP growth in 2021-22 will be a good 11%.
Is the worst over? The answer is a decisive “yes”. Take the GST revenues for August, for instance, which stood at Rs 86,449 crore. Despite the lockdown, this was 88% of the GST collected in the same month, last year. Overall, 48.3 million e-way bills were generated in July, almost back to pre-Covid levels of 55.3 million bills, in January 2020. Again, the Indian Railways’ freight loading for August 2020, at 94.33 million tonnes, was 3.31 million tonnes higher compared to August 2019. The Manufacturing Purchasing Managers’ Index (PMI) stood at 52 in August, up from 46 in July. PMI had fallen to a historic low of 27.4 in April but has been steadily climbing since. A sizeable Rs 1.63 lakh crore have also been sanctioned to over 42 lakh MSME units under the emergency credit line guarantee scheme (ECLGS).
More importantly, Modi naysayers and embarrassingly ill-informed writers like Chetan Bhagat, who raised doubts on India’s ability to attract FDI, should not forget that $20 billion are what India attracted as investments and pledges from 15 companies in just three months from April to July 2020 during the Covid-19 pandemic. This $20 billion is a massive vote of confidence for Modinomics. The Taiwanese company Pegatron is the fourth Apple supplier to decide to set up a base in India, after Foxconn, Wistron and Compal Electronics pledged billions in India’s journey towards becoming a global electronics hub.
News has it that Australia is facing its worst recession in 30 years, China’s food shops are running out of supplies and the US might end the year with a 4.2% drop in consumption spending. In sharp contrast, India is doing a far better job in dealing with the Wuhan virus, best amplified by the fact that we constructed 3,181 km of national highways between April and August this year, versus a target of 2,771 km.
At his recent US-India Strategic Partnership Forum (USISPF) address, Prime Minister Modi said, “We are future-proofing India in every way, enabling New India to take off.” Well, PM Modi’s words have found resonance. For example, India’s Hero Motocorp, the world’s largest 2-wheeler company, that derives over 65% sales from rural areas, reported a healthy 7.6% YoY growth in overall sales, selling 5.8 lakh units in August 2020. Ditto for M&M, that derives over 50% sales from rural India. It saw a robust 28% YoY rise in overall tractor sales in July 2020. Maruti Suzuki saw a 21.3% growth in car sales in August, while Tata Motors saw a splendid 154% growth in auto sales. Indeed, since auto sales are a lead indicator, India’s September quarter GDP should see a sharp bounce back.
f $542 billion, the Modi government’s potential move to offer production linked incentives (PLIs) to automobile manufacturers, solar panel makers, speciality steel and consumer appliance companies is a vindication of the fact that, despite Covid and associated challenges, India under Prime Minister Narendra Modi has got its act together, decisively and with no room for any “ifs” or “buts” whatsoever.
The writer is an economist, chief spokesperson for BJP Mumbai, and the bestselling author of ‘Truth & Dare: The Modi Dynamic’.