The GDP numbers are out. These refer to the three months from April to June, which were mostly about a harsh lockdown. More than three-fourths of the economy was shut down at least for a month, and hence output, income, jobs were lost. The contraction in India’s GDP was the most acute among the top 20 countries of the world, i.e. the G20 group.
One of the G20 members is called EU, which is actually a collection of 27 countries of Europe. During that same quarter, China’s GDP went up by 12 per cent. China’s GDP contraction happened in the previous quarter, i.e. from January to March, which also included the Chinese New Year, when almost the entire country is on holiday for two weeks. The remarkable thing is that in just one quarter the Chinese economy has bounced back and is in strongly positive territory. India’s July to September quarter numbers will not be known until after Diwali, and it is unlikely that we will see as smart a bounce back as China. We will be lucky to see mildly positive growth from October, and then sharply higher from January. Much of this will depend on fiscal stimulus 2.0, which is aimed at urban folk (unlike 1.0, which was aimed mainly at rural folk and agriculture), and also the return of consumer and business confidence. Let’s not forget that much of the revival in GDP has to be led by the private sector. The central and state governments can only play an enabling role, and the fiscal stimulus of say 5 or 6 per cent of GDP is a lever which uses the fulcrum of “feel good” factor and business optimism to pole vault the economy into higher and positive growth trajectory.