For India, the year 2021 that went by has been about rebuilding from the ravages of 2020 amid the COVID-19 storm which had pushed the already slowing economy into contraction mode.
The pandemic-related lockdowns sent the stalling economy into free fall, causing output to shrink by 24.4% and 7.4% in the first two quarters of 2020-21, respectively.
The country’s Gross Domestic Product (GDP) growth had dipped to a mere 3% in the fourth quarter of 2019-2020. The resultant destruction meant that job and income losses coincided with the unfolding health crisis.
GS-III: Indian Economy (Economic Growth and Development, Planning usage and Mobilisation of resources, Inclusive growth and issues therein)
Dimensions of the Article:
- Objectives of growth in India
- Understanding the Economic Outlook of India
- Indian Economy After Pandemic
- Sectors during Pandemic
- Back to basics: Economic Recovery
- What is a K-shaped recovery?
- About V-Shaped Recovery
Objectives of growth in India
- Besides having high growth rate, it is also necessary to ensure that growth is inclusive, sustained, clean and formalized.
- The investment rate should be raised from 29 per cent to 36 per cent of GDP which has been achieved in the past, by 2022-23.
- Exports of goods and services combined should be increased from USD 478 billion in 2017-18 to USD 800 billion by 2022-23.
- Moving from capital intensive sectors to labour intensive sectors to provide employments to young generation.
- Making India as a five trillion-dollar economy by 2024.
Understanding the Economic Outlook of India
- What makes economic recovery challenging is that this decline followed three years of sharp decline in GDP even before the novel coronavirus pandemic hit the country.
- Economic growth had already decelerated to 4% in 2019-20, less than half from the high of 8.3% in 2016-17.
- Since then, the slowdown in the economy has not only made things worse as far as economic recovery is concerned but also come at a huge cost for a majority of households which have lost jobs and incomes.
Indian Economy After Pandemic
- An ambitious target was set for disinvestment from public sector enterprises backed by a new policy to retain a ‘bare minimum’ presence of state-owned firms even in strategic sectors.
- The government explained that higher capital spending would trigger multiplier effects by nudging up demand in several sectors and spur job creation and consumption.
- A K-shaped recovery is unfolding thanks to a divergence between those who needed to protect their lives and livelihoods.
- While manufacturing and construction recovered, the economy’s overall output remained far below even the low pre-pandemic levels.
- The recovery remains uneven and fragmented with economists also unconvinced about its sustainability.
- Demand and investments were yet to see a meaningful and durable pick-up and any improvements were expected to be limited.
- Gradual domestic economy had been grappling with low demand and a subdued investment climate.
Sectors during Pandemic
- Agriculture is the only sector to record positive growth throughout the pandemic.
- Sectors like manufacturing, mining, electricity, recovered above pre-COVID levels by September.
- Employment-intensive sectors like construction, the contact-intensive trade and hotels industry, as well as financial services and real estate, continue to languish below their pre-pandemic levels.
- There are some other interesting aspects of this year’s economic trajectory.
- Wholesale price inflation has also hit an all-time high in the current series of the index, making input costs the number one worry for businesses.
Back to basics: Economic Recovery
- Economic Recovery is the business cycle stage following a recession that is characterized by a sustained period of improving business activity.
- Normally, during an economic recovery, GDP grows, incomes rise, and unemployment falls and as the economy rebounds.
- Economic recovery can take many forms, which is depicted using alphabetic notations. For example, a Z-shaped recovery, V-shaped recovery, U-shaped recovery, elongated U-shaped recovery, W-shaped recovery, L-shaped recovery and K-shaped recovery.
What is a K-shaped recovery?
- A K-shaped recovery happens when different sections of an economy recover at starkly different rates.
- A K-shaped recovery leads to changes in the structure of the economy or the broader society as economic outcomes and relations are fundamentally changed before and after the recession.
- This type of recovery is called K-shaped because the path of different parts of the economy when charted together may diverge, resembling the two arms of the Roman letter “K.”
About V-Shaped Recovery
- V-shaped recovery is a type of economic recession and recovery that resembles a “V” shape in charting.
- Specifically, a V-shaped recovery represents the shape of a chart of economic measures economists create when examining recessions and recoveries.
- A V-shaped recovery involves a sharp rise back to a previous peak after a sharp decline in these metrics.
- It is the next-best scenario after Z-shaped recovery in which the economy quickly recoups lost ground and gets back to the normal growth trend-line.
- In this, incomes and jobs are not permanently lost, and the economic growth recovers sharply and returns to the path it was following before the disruption.
-Source: The Hindu