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GDP fall: Can we overcome this?

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First let us know what actually GDP is in a simplest way, and the effect it can create on the Nation’s Economy. GDP – Gross Domestic Product is money or currency related measure or market value of all final goods and services produced in a specific time period. GDP is literally a country’s economic growth scorecard. It provides the size of an economy and growth rate. It includes expenditure, production, incomes of the country.

Of all the components that make up a country’s GDP, the foreign balance of trade is especially important. The GDP of a country tends to increase when the total value of goods and services that domestic producers sell to foreign countries exceeds the total value of foreign goods and services that domestic consumers buy (Trade Surplus). If the opposite happens, it is called trade deficit – which is relying more on foreign product imports than exporting domestic products. So this is the major concern in the implementation of Aatma Nirbhar Bhaarat initiative (Self Reliant India)

We understood trade surplus results in GDP increase and trade deficit results a depletion in GDP. Now, let’s see the GDP of different countries during the period of Covid 19 (i.e., April – June 2020) – In this period India faced a worst scenario in GDP growth. And, along with India, developed countries like UK, US also observed a huge negative impact on GDP due to the pandemic except China. But, comparatively India is the most effected. Let’s now think about why this happened?

We should understand the fact that due to the pandemic situation, the whole world went on for a lockdown because heath is a major concern for any government. Even in India, Lockdown is implemented in phases from March – July, which is almost a span of 4 months without any transaction of goods, production and manufacturing activities are shut down, people losing their jobs, stopped purchasing goods, no infrastructural developments. The only thing that is running in this period is health and agriculture industry. When all other industries faced a negative growth rate, only agriculture industry showed some positive results.

From the past India never faced a major health issue like this. So, India never prepared for a large scale health crisis, because of which we had to rely on other countries for testing kits, Protection equipment, ventilators, etc. which made the government to allocate money for imports on these products more. Simple logic is that, due to lockdown there is no inflow for the government in any sector. There is only outflow for the medical sector. So, everybody expected there would be a fall in the GDP but no one expected such a huge fall which broke all previous records of depletion. But, this is not the time to play the blame game. Instead we should think for the solutions to overcome the situation. Blame game won’t increase growth rate; it only increases the hatred.

Let’s now talk about ways to solve this problem,

  1. What government is trying to do to overcome this situation?

Idea behind Aatmanirbhar Bharath (Vocal for Local) – As we have discussed before, we can see a faster growth in GDP only when there is an increase in our production and exports to other countries than that of the imports to our country. So, this scheme is introduced to encourage the locals to invest on the industries which in turn increases the production rate, thereby attracting foreign countries to buy our goods. Government is providing relaxations and financial assistance to those who want to set up small scale industries. Relaxations are also provided for the Foreign companies to invest in India under FDI (Foreign Direct Investment) scheme.

  • What private companies like Jio are doing?

Jio recently announced in their anniversary meet that, India will start their 5G services by 2021 and will become a global supplier of 5G network. It also made a deal with Google to manufacture 5G compatible mobile phones at a reasonably cheaper price. Jio industries chairman – Mukesh Ambani stated that these announcements are a step towards ‘Aatma Nirbhar Bharath’ Scheme.

  • Privatisation of PSUs

So, we have been watching the news in the recent times that government is planning to privatise some of the Public Sector Undertakings. People are thinking that this is a bad idea and it is just for the growth of some corporate families but let’s just talk about facts and leave it to them whether it’s a bad or good idea. So, if we understand the reason behind privatisation, many government owned companies are actually making a huge loss. If we see the report of Public Enterprises Survey done in 2018 period, it is clear that companies like BSNL, MTNL, Air India, etc. are running with a huge loss (in thousand crores).

For these companies (and many more such), despite running in loss, because of being a government undertaking, the government should pay the salaries to the employees, should bear the maintenance costs, invest on it even though the company is in losses. But, if such companies are privatised, the companies can work for profits without any political interferences, also in this competitive world, private companies try to be on top all the time, which makes them think about making profits, thereby helping in the economic growth. But, there is also a concern that private monopoly occurs in the market which causes inflation and damage to the consumers. It is better if privatisation is restricted to certain sectors as it may affect the interests of public.

  • What we can do?

Infrastructure development like construction of buildings, roads, bridges, ports, etc.  – which creates more employment and also development both hand in hand.

Manufacturing/Production: India is relying more on foreign products especially electronic gadgets like laptops, mobile phones. There are a very few companies in India which manufactures electronic gadgets, which are not even worthy compared to the foreign products. So, there is a need for manufacturing and production engineers to concentrate on making worthy products at a cheaper rate which helps in the reduction of country’s dependency on foreign products.

If you are a student – Think about entrepreneurship than that of doing a job. So, in India we can see 90% of students are engineering students and most of them choose to be working in some companies. I won’t say it is wrong but, start thinking about setting up a business – which would create more number of jobs thereby unemployment goes down. It isn’t that easy, but it is not impossible too.

Innovations – Stop just pointing out problems, instead start thinking about ways to solve the problems. India need innovations which are globally or at-least nationally useful, which makes our work easier, increases productivity, helps for the economic growth.

If we think negatively, we only see the negative side. But with that, can we expect something positive to happen?

If we think – we can’t, we can never achieve. If we think – we will, Can’t we overcome this?

So, let’s stop blaming others and start doing our part in Nation Building.

Jai Hind

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