Skip to main content

India's GDP down by 50%, not 23%, job loss 200 million not 122 million: Top economist

By Our Representative 
One of India’s topmost economists has estimated that India’s Gross Domestic Product (GDP) decline was around 50%, and not 23%, as claimed by the Government of India’s top data body, National Statistical Organization (NSO). Prof Arun Kumar, who is Malcolm S Adiseshiah chair professor, Institute of Social Sciences, New Delhi, said this was delivering a web policy speech, organised by the Impact and Policy Research Institute (IMPRI), New Delhi.
According to him, the flawed calculation emanated from the view among India’s policy makers that the unorganized sector was “residual”, one reason why it has failed to receive “ample attention.” He underlined, “In GDP calculation, it is assumed that the unorganized sector is growing at a similar rate as the organized sector leading to overestimation of GDP.”
Referring to the impact of Covid-19 on the unorganized sector, Prof Kumar said, 94% of the employment in this sector yields 45% of the output and has low and negligible savings. “But when income fell for these 94% of the population during the lockdown, demand for essentials such as agricultural produce fell, as there was very little or no savings”, he said.
“There are over six crore enterprises majorly comprising micro units which had exhausted the savings quickly and are unable to restart”, Prof Kumar noted, adding, “The situation is similar for self-employed like traders, mason, taxi and auto drivers, etc. Having the largest unorganized sector in the world, the situation is very difficult and worrisome.”
Pointing out that the Government of India’s estimation is based on last year’s GDP, Rs 204 lakh crore, Prof Kumar said, it should instead be based on Rs 145 lakh crore, as the economy showed a sharp downward turn.
Simultaneously disputing the data on unemployment during lockdown provided by the Centre of Monitoring Indian Economy (CMIE), a private consultancy firm, Prof Kumar said, unlike World War-2 and the global financial crisis of 2008, when employment was full, demand was short and production was shifted to other goods, lockdown led to mass unemployment.
According to him, CMIE estimated unemployment at around 122 million workers. However, the actual figure “stands at over 200 million”, if one incorporates the unorganised sector. He advise CMIE to “reconsider its sample”, as it allegedly did not take into account the workers who migrated to their natives, leading to its “underestimation.”
Prof Kumar said, all segments of society experienced reduction in consumption and investment, impacting demand and supply in the economy. As a result the businesses began failing. Thus, according to the All India Manufacturer Organization estimated, 30% of the businesses would fail. Similarly, the Confederation of All India Traders’ Association argued that 30% of the small traders would fail.
In GDP calculation, it is assumed, unorganized sector is growing at a similar rate as  organized sector, leading to its overestimation
He predicted, “Business failure is likely to be large in the coming year. There are high chances of this for high leverage firms who have a high ratio of debt against their equity. The government policy of a moratorium period of six months is only a temporary relief. The interests are accumulating. The commercial banks now fear that the NPAs would further rise.”
The economist said, “When the economy declines, so does the tax collections. This year’s budget was based on expectation that the economy would grow at 10%, but as the economy, leading to collapse in tax collection by more than 40%. Revenues of states and centre are likely to fall to 12% of GDP from 16.5%.”
Calling the Reserve Bank of India (RBI) of using interest rate card to boost economic activities in the country “ineffective”, he said, “When businesses are shut and production is stalled, then credit demand will not increase. This has led to surplus liquidity with commercial banks amounting to Rs 8 lakh crore as deposited with RBI by the banks.”
He added, “India is having more liquidity as compared to the pre-demonetization period but due to reduced velocity of circulation of money because of reduced economic activities, liquidity is in vain.”
Prof Kumar expected that in the post-pandemic situation, owing to the demand situation, there is threat of deflationary situation in the coming times. Suggesting the way forward he said, the government should issue Covid-19 bonds to immediately raise the money, and also utilise around Rs 8 lakh crore liquidity of funds currently lying, for the immediate expenditure needed for the ailing economy.

Comments

sanu said…
Valid point

TRENDING

Insider plot to kill Deendayal Upadhyay? What RSS pracharak Balraj Madhok said

By Shamsul Islam*  Balraj Madhok's died on May 2, 2016 ending an era of old guards of Hindutva politics. A senior RSS pracharak till his death was paid handsome tributes by the RSS leaders including PM Modi, himself a senior pracharak, for being a "stalwart leader of Jan Sangh. Balraj Madhok ji's ideological commitment was strong and clarity of thought immense. He was selflessly devoted to the nation and society. I had the good fortune of interacting with Balraj Madhok ji on many occasions". The RSS also issued a formal condolence message signed by the Supremo Mohan Bhagwat on behalf of all swayamsevaks, referring to his contribution of commitment to nation and society. He was a leading RSS pracharak on whom his organization relied for initiating prominent Hindutva projects. But today nobody in the RSS-BJP top hierarchy remembers/talks about Madhok as he was an insider chronicler of the immense degeneration which was spreading as an epidemic in the high echelons of th

Central pollution watchdog sees red in Union ministry labelling waste to energy green

By Chythenyen Devika Kulasekaran*  “Destructors”, “incinerators” and “waste-to-energy (WTE) incineration” all mean the same thing – indiscriminate burning of garbage! Having a history of about one and a half centuries, WTE incinerators have seen several reboots over the 19th, 20th and 21st centuries. 

First-of-its-kind? 'Eco-friendly, low cost' sewage treatment system installed in Gujarat

Counterview Desk Following the installation of the Unconventional Decentralized Multi-Stage Reactor (UDMSR) for sewage treatment, a note on what is claimed to be the  first-of-its-kind technology said, the treated sewage from this system “can be directly utilized for agricultural purposes”, even as proving to be a “saviour in the times of water crisis.”

A Hindu alternative to Valentine's Day? 'Shiv-Parvati was first love marriage in Universe'

By Rajiv Shah*   The other day, I was searching on Google a quote on Maha Shivratri which I wanted to send to someone, a confirmed Shiv Bhakt, quite close to me -- with an underlying message to act positively instead of being negative. On top of the search, I chanced upon an article in, imagine!, a Nashik Corporation site which offered me something very unusual. 

Indo-Bangla border: Farmers facing 'illegal obstacles' in harvesting, transporting yields

  Counterview Desk  In a representation to the chairperson, National Human Rights Commission, human rights defender Kirity Roy, who is secretary, Banglar Manabadhikar Suraksha Mancha (MASUM), has said that Border Security Force (BSF) personnel are creating "illegal obstacles" for farmers seeking to harvest their ripened yields and transport them to the market in village Jhaukuthi of Cooch Behar district.

Wasteland, a colonial legacy, being used to 'give away' vast tracts to Ratnagiri refinery

By Fouziya Tehzeeb* William D’Souza, a 55-year old farmer from Kuthethur, Mangalore, was busy mixing cattle feed when we arrived at his doorsteps. Around 25 km from the bustling city of Mangalore, Kuthethur is a lush green village with thick vegetation. On the way to William’s house the idyllic view gets blocked by the flares and smoke arising from the Mangalore Refinery and Petrochemicals Limited (MRPL).

'Flawed' argument: Gandhi had minimal role, naval mutinies alone led to Independence

Counterview Desk Reacting to a Counterview  story , "Rewiring history? Bose, not Gandhi, was real Father of Nation: British PM Attlee 'cited'" (January 26, 2016), an avid reader has forwarded  reaction  in the form of a  link , which carries the article "Did Atlee say Gandhi had minimal role in Independence? #FactCheck", published in the site satyagrahis.in. The satyagraha.in article seeks to debunk the view, reported in the Counterview story, taken by retired army officer GD Bakshi in his book, “Bose: An Indian Samurai”, which claims that Gandhiji had a minimal role to play in India's freedom struggle, and that it was Netaji who played the crucial role. We reproduce the satyagraha.in article here. Text: Nowadays it is said by many MK Gandhi critics that Clement Atlee made a statement in which he said Gandhi has ‘minimal’ role in India's independence and gave credit to naval mutinies and with this statement, they concluded the whole freedom struggle.

CAA disregards India's inclusive plural ethos, 'betrays' ideals of freedom struggle: PUCL

Counterview Desk    "Outraged" at the move of the Central government to implement the Citizenship Amendment Act, 2019 (CAA 2019) weeks before the election, the top rights group, People's Union for Civil Liberties (PUCL), has demanded that the law be repealed. 

Buddhist shrines were 'massively destroyed' by Brahmanical rulers: Historian DN Jha

Nalanda mahavihara By Our Representative Prominent historian DN Jha, an expert in India's ancient and medieval past, in his new book , "Against the Grain: Notes on Identity, Intolerance and History", in a sharp critique of "Hindutva ideologues", who look at the ancient period of Indian history as "a golden age marked by social harmony, devoid of any religious violence", has said, "Demolition and desecration of rival religious establishments, and the appropriation of their idols, was not uncommon in India before the advent of Islam".

Sections of BSF, BGB personnel 'directly or indirectly' involved in cross border smuggling

By Kirity Roy*  The Border Security Force (BSF) of India and the Border Guard Bangladesh (BGB) of Bangladesh met for 54th Director General level meeting at Dhaka, Bangladesh, on 5th to 9th March, 2024 to discuss on minimizing killings at border area, illegal intrusion, trafficking of drugs and other narcotics, smuggling of arms and ammunitions and other crimes at bordering areas. Further, the summit had an agenda to discuss on overall development in 150 yards area at both sides of the border and design an activity plan for the same.