Manufacturing is weakening, as is the job-generating construction
sector.
India’s
economy grew at a paltry 3.1 per cent in the quarter ended March 2020, the
lowest in 44 quarters. One thing that makes this gradual slowdown more serious
than the ones experienced before is that it came without any external shock.
Also, the data shows the slump has covered all the sectors.
Manufacturing is
weakening, as is the job-generating construction sector .
Agriculture and
public spending are the only green shoots of the economy, and the concentration
of the slowdown in the core economy is becoming sharper . Core GVA is the gross
value added in the economy without that in the farm sector and public
administration. Consumer spending grew at 2.7 per cent in the March quarter,
while investments contracted for a third straight month, falling faster than
the preceding quarter every time .
The data also
showed the economy grew slower than initially estimated in the first half of
the fiscal year 2019-20. For example, the output from construction activities
was 6 per cent lower than what it had been estimated in November 2019. The economic slump, which
began after demonetisation and implementation of the GST,
has shown no signs of recovery until the end of FY20 The Covid economic shock would play over and
above this pre-existing slowdown.
Slowing of growth
has had a definite impact on the Centre’s revenues, but revenue spending, most
of which is salaries, pensions and interest payments, has grown massively .
Capital expenditure has grown slower over years. While the gap between capex
and fiscal deficit was narrowing till FY17, it blew out of proportions in FY20.
Fiscal deficit neared Rs 10 trillion last year, and its quality deteriorated
These underline
the limitations the Centre faces in giving a direct stimulus to the economy.
