Jaipuria Institute of Management Indirapuram Ghaziabad focusses on providing updated information and data analysis to abreast our MBA graduates for enhancing their analytical skills and knowledge in different domains. An attempt is being made here to highlight the positive growth of few sectors such as agriculture, manufacturing, electricity and construction in Q3 (October – December) of FY2020-21 and questions the sustainability of these sectors nascent growth recovery in the wake of recent rise in crude oil prices and a surge in COVID-19 cases.
After the great depression of 1930s, COVID-19 induced recession was the greatest challenge encountered by the global economy. With reducing gross domestic product, countries were witnessing widespread unemployment, increased poverty and reduced incomes. It started adversely impacting not only the local business of various countries but also the business across their borders. The world economy faced reverse gear from globalization to de-globalization as the countries were forced to lockdown their borders. The production work was stopped, and movement of goods, capital, and human were all restricted. The destruction by COVID-19 across global countries continues till now. The latest real GDP growth figures of G20 countries for Q3 of FY2020-21 are as follows as per The Times of India, 26th February 2021. Argentina -10.2%, United Kingdom -7.8%, Italy -6.6%, South Africa -6.0%, Canada -5.2%, France -5.0%, Euro Area -5.0%, Mexico -4.5%, Saudi Arabia -4.1%, Germany -3.9%, Brazil -3.9%, Australia -3.8%, Russia -3.4%, United States -2.5%, Indonesia -2.2%, Korea -1.3%, Japan -1.2%, India 0.4%, China 6.5% and Turkey 6.7%.
Many sectors of Indian Economy (industry, manufacturing, construction and services) witnessed a decrease in growth in Q4 of FY2019-20. The real GDP and different sectors (excluding agriculture and electricity (only in Q2)) already registered a negative growth in Q1 and Q2 of FY2020-21. However, the most recent Q3 result (announced by the Ministry of Statistics and Program Implementation (MOSPI)) was showing an improvement as compared to Q2 result for almost all sectors (See Table 1).
Table 1: Real GDP growth rate of India and it’s different sectors
| Quarter | Real GDP | Agriculture Sector | Industrial Sector | Mining Sector | Manufacturing Sector | Electricity Sector | Construction Sector | Service Sector |
|---|---|---|---|---|---|---|---|---|
| Q1 (2019-20) | 5.4 | 3.3 | 4.2 | -1.3 | 0.6 | 6.9 | 3.7 | 6.9 |
| Q2 (2019-20) | 4.6 | 3.5 | 0.5 | -5.2 | -3.0 | 1.7 | 1.0 | 8.2 |
| Q3 (2019-20) | 3.3 | 3.4 | -0.3 | -3.5 | -2.9 | -3.1 | -1.3 | 7.1 |
| Q4 (2019-20) | 3.0 | 5.9 | -0.6 | 5.2 | -1.4 | 4.5 | -2.2 | 4.4 |
| Q1 (2020-21) | -24.4 | 3.3 | -38.1 | -18.0 | -35.9 | -9.9 | -49.4 | -20.9 |
| Q2 (2020-21) | -7.3 | 3.0 | -2.1 | -7.6 | -1.5 | 2.3 | -7.2 | -11.4 |
| Q3 (2020-21) | 0.4 | 3.9 | -2.0 | -5.9 | 1.6 | 7.3 | 6.2 | -0.87 |
| Source: Computed from the Original Data obtained from CMIE Economic Outlook &www.mospi.gov.in (Press Note on 26th February 2021) | ||||||||
With the Q3 positive growth, India has now departed from the technical recession phase. Indian economy declined to an unprecedented 24.4% in Q1 of FY2020-21 following the coronavirus pandemic and resultant lockdowns. However, due to increase in economic activities in Q2, the GDP decline narrowed to 7.3%. With continuous relaxation on activities throughout the country major business and economic indicators such as GST collections, manufacturing PMI (Purchasing Managers’ Index), forex reserves, railway freight, merchandise exports and passenger vehicle sales have shown positive successive growth in past few months. Recovery of activities also reinforced by the rollout of COVID-19 vaccines to some extent, outlining a slew of tax incentives to boost manufacturing, reduction of the repo rate by a total of 115 basis points since March 2020 by the RBI (Reserve Bank of India) and increasing confidence in the market to bring the situation back to normal. The economy has witnessed a positive growth in Q3 of FY2020-21. A finance ministry statement said about a V-shaped recovery after the release of the GDP data on 26th February 2021.
However, we have to wait and watch for the release of Q4 real GDP growth of FY2020-21 & Q1 real GDP growth of FY2021-22 in the wake of recent increase in crude oil prices, second wave of COVID-19 pandemic appeared recently, increasing number of corona positive and death cases. These might pose threat to the nascent recovery in sectors such as agriculture, manufacturing, electricity and construction. Moreover, some sectors such as retail, airlines, hotels and hospitality are still spinning from the pandemic setback. Hence, from the above-mentioned information, it looks very optimistic to predict that the nascent recovery will sustain in COVID-19 mugging.
Dr.Sadananda Prusty
PhD (Dean-Academics)
Jaipuria Institute of Management, Indirapuram, Ghaziabad
