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Apart from COVID, economy slumped post demonetization & GST

EconomyApart from COVID, economy slumped post demonetization & GST

The RBI released a report stating that “It may take 12 years for the Indian economy to overcome COVID losses.”

The Slump in the Indian Economy Before COVID-19

Something people never focus on in the Indian economy is how the crash came after demonetization and GST implementation.  There was a definite slowdown in production in markets and also a slump in consumption.

Markets turned more towards China zooming the trade markets between India and China.  In fact, the India-China bilateral trade increased by 15.3 percent to over USD 31 billion in the first quarter of this year, according to trade data released by the Chinese Customs on Wednesday, despite strained relations due to the lengthy military deadlock in eastern Ladakh.

During the 3-month period from January to March, China’s exports to India zoomed to USD 27.1 billion.  Last year, the India-China bilateral trade hit a record high of over USD 125 billion.

While the Indian economy took a heavy hit in the ongoing COVID-19 pandemic, as it did in the world, there is a slow recovery,  but India was facing a meltdown even before COVID, which economists fail to point out.  While heavy tax measures and other implementations may have helped the government’s treasury, it placed heavy burdens on the common citizen amid declining jobs and inflation for with the rise in fuel prices, all items in the market are soaring.

RBI Statment

The RBI released the Report on Currency and Finance (RCF) for the year 2021-22 on Friday whose theme is ‘Revive and Reconstruct’ in the context of nurturing a durable recovery post-COVID and raising trend growth in the medium-term.

The Indian economy may take over 12 years to overcome the COVID-19 losses, according to a report released by the Reserve Bank of India (RBI).

In its report on ‘Currency and Finance for the Year 2021-22’, the RBI said, the pandemic is a watershed moment and the ongoing structural changes catalyzed by the pandemic can potentially alter the growth trajectory in the medium-term.

“Sustained thrust on capital expenditure by the government, push to digitalization and growing opportunities for new investment in areas like e-commerce, start-ups, renewables and supply chain logistics could, in turn, contribute to step up the trend growth while closing the formal-informal gap in the economy,” the report noted.

The RBI further noted in the report, that the pre-COVID trend growth rate works out to 6.6 percent (CAGR for 2012-13 to 2019-20), and excluding the slowdown years it works out to 7.1 percent (CAGR for 2012-13 to 2016-17).

“Taking the actual growth rate of (-) 6.6 percent for 2020-21, 8.9 percent for 2021-22 and assuming a growth rate of 7.2 percent for 2022-23, and 7.5 percent beyond that, India is expected to overcome COVID-19 losses in 2034-35,” the report said.

The output losses for individual years have been worked out to Rs 19.1 lakh crore, Rs 17.1 lakh crore, and Rs 16.4 lakh crore for 2020-21, 2021-22, and 2022-23, respectively.

The Reserve Bank of India released the Report on Currency and Finance (RCF) for the years 2021-22 on Friday. The theme of the report is “Revive and Reconstruct” in the context of nurturing a durable recovery post-COVID and raising trend growth in the medium term.

The blueprint of reforms proposed in the report revolves around seven wheels of economic progress viz, aggregate demand; aggregate supply; institutions, intermediaries and markets; macroeconomic stability and policy coordination; productivity and technological progress; structural change; and sustainability.

The report stated, “the pandemic is not yet over. A fresh wave of COVID has hit China, South Korea, and several parts of Europe. However, various economies are reacting divergently ranging from a no-COVID policy in some jurisdictions (eg, China, Hong Kong, and Bhutan) on the one hand to those with relatively open borders and removal of internal restrictions (eg, Denmark and the UK).

IMF: India May Not Become the $5 trillion Economy before FY29

A recent report from IMF reveals that India may not become a $5 trillion economy before FY29, as the IMF data shows.  IMF’s expectation is higher than that of the RBI, which sees growth at 7.2% in the current fiscal and 6.3% in the next.

The severity of India’s economic crisis is evident when quantified
The real growth in average incomes is slower than that in consumption and investments, and the nominal growth in company tax collection is slower than growth in nominal incomes, data shows.

At the present times, India is sabotaged by inflation, and a plight of joblessness; however, it is evident that the ones benefiting are the business class and the million and billianares which is why there is deep silence amongst the affluent while other voices are snuffed out.

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