India's GDP Decline

- by Abhinav

The inauguration of the Modi Government 2.0 does not seem encouraging because the economy is showing no sign of improvement in many sectors i.e. automobile, manufacturing, FMCG, banking, and agriculture. As we know the Indian banking sector is passing through a very rough time for a long time.

THE total NPA of the Indian banks is around Rs 7.9 lac crore which is blocking the way of the new loans to the other borrowers. The recent announcement of the mergers of the banks may further create an atmosphere of anarchy in the mind of the investors and depositors. Indian agriculture has been a key contributor to India’s growth story and continues to be one of the biggest employers. It contributes around 15% in the Indian GDP and employs around 55% population of the country. But this sector is also passing through a very rough time. Farmers are not getting adequate prices for their crops that is why farmers are committing suicide throughout the country.

Manufacturing saw a contraction in the second and third quarters, against the growth of just above 2 percent in the first quarter. The fall in the construction sector is one of the reasons for the economic weakness in the country today, A comparison with the other major economies also indicates that India is over-dependent on construction investments. Amid this lockdown, the construction industry and manufacturing industries were completely shut off. At over 15 percent of GDP, investments in the construction sector in India are more than double that in the US and Thailand.

In order to reverse the declining GDP growth and set its eyes on the ambitious target of a $5 trillion economy in the post COVID world scenario, India needs to boost consumption, private investment and achieve double-digit export growth. India’s share of world export is about 1.7 percent. Even in a world which is showing protectionist tendencies, if it manages to double India’s exports to about 3 percent of global trade, our exports will go from $300 billion to $600 billion, which is eminently doable.

Despite the economic decline, there are sectors that are least affected amid this recession. Healthcare Industry: Medicines are necessary products, the demand for which will never vanish even if a recession takes place. A great example of such a company would be Johnson and Johnson.

Education Industry: Education is one industry that can never slow down. Kids will continue to go to school and parents will continue to pay for it despite recession, stagflation, or economic breakdown.

FMCG industry: Regular daily items like detergent, toothpaste, skincare products, etc., are such basic necessities that can’t be avoided. This sector deals with necessity products. We feel that we have maintained our lifestyles even when our income has dropped. Some of the major players are- ITC, Dabur.

Utility Industry: Utilities like electricity, water bills, gas bills, and production; are some kind of payments that cannot be delayed.

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