GDP contraction
- September 1, 2020
- Posted by: OptimizeIAS Team
- Category: DPN Topics
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Subject: Economy
Context:
According to data released by the National Statistical Office, India’s GDP growth rate contracted by 23.9% for the April to June quarter.
Concept:
- The contraction reflects the severe impact of the COVID-19 lockdown, which halted most economic activities, as well as the slowdown trend of the economy even pre-COVID-19.
- Economists expect this to contribute to a contraction in annual GDP this year, which may be the worst in the history of independent India.
- The Indian economy is in a deeply vicious cycle, where demand is contracting so heavily, while the capacity to neutralise this contraction has also contracted equally because of the tax revenue contraction.
- Last contraction of the economy occurred in 1979-80, when GDP shrank 5.2%. There have been four other instances of minor contraction between 1965-68, and 1972-73.
- India is among the worst in countries severely impacted by the Covid-19 pandemic, an analysis of GDP number across major economies has shown.
- While China, which many believe to be the epi centre of the Covid-19 outbreak, announced a surprise 3.2 per cent growth in its GDP during this quarter compared to the same period last year, others like the UK and Germany witnessed a contraction. For the April-June period, the UK took a 20.4 per cent hit in its GDP, while Germany experienced a “record” 10.1 per cent contraction.