GDP Rebound is Inevitable

Sinking GDP and negative growth rates are spooking all of us. The fact that we were expecting the nosedive has not diminished the impact when it has hit us. The problem needs to be addressed with uncommon commitment and a sense of urgency. The crisis is primarily a lagging indicator of two decades of mismanaged economy. Couple that with the Covid19 pandemic and the expensive cross-border tensions with China; and we have a daunting challenge on our hands.

GDP is the aggregated value of goods and services produced within a year in the country. That apparently impossible to calculate figure can be arrived by totaling consumption, investment, exports and government expenditure.

Government has understandably found their own expenditure a lot easier to handle. It is the domestic products in the other three areas that have shrunk.

Drilling down into consumption, investments and exports reveals the underlying causes. It is going to be a hard grind, but we need to focus on agricultural reforms and overhauling our human capital as our first two priorities. At the core is the traditional skewed application of large manpower resources in a low returns agriculture sector.

Then, it would appear that the debt-driven consumption is drying out. With uncertainties all around, there has been a dip in consumer confidence. It is noticeable that consumer has moved to saving rather than buy, buy, buy and generally have a ball.

Every setback is, however, an opportunity for a fresh look. Reconstructing the house is better than restoring it to its shape from where it collapsed. The current dispensation, apparently short on experience of handling macroeconomics, is adept at seeing what has been wrong with the development priorities since decades. And fearlessly acts. That is where hope is.

We already see a sense of competition within our federal structure when a laggard state like UP is well on its way to attract manufacturing industry. We see what Andhra Pradesh is switched on and doing its damnedest to get more and more FDI into the state.

The government is working at several initiatives that shall convert India’s young population dividend into hard returns. New Education Policy is another much needed reform where tunnel-visioned and straightjacketed curricula are being made more flexible. Liberalising the trade in agricultural commodities is one such move that is designed to keep the middle-men honest.