What Does the 23.9% Fall in GDP Mean? Analysing India’s Worst Drop

The Q1 GDP of FY 2020-21 dropped 23.9%, revealing the extent of damage the pandemic has caused to India’s economy.

The scary truth behind recent economic figures

(Photo: The Quint)

Video Editors: Puneet Bhatia & Vivek Gupta

India’s gross domestic product (GDP) dropped by 23.9% in the first quarter of FY 2020-21, revealing the extent of damage the pandemic has caused to the country’s economy.

Every sector has seen a drastic slump in growth:

(Graphic: The Quint)

This crash also means that it will take at least two to three years for the economy to revive.

“Core sector growth, which had declined by 38 percent in April, has progressively reduced to 22 percent in May, 13 percent in June and 9.6 percent in July 2020. Core sector output is clearly showing a V- shaped recovery.”

KV Subramanian, Chief Economic Advisor

But what is the root cause behind this crash? Because of the lockdown, there was no labour due to lack of demand which in turn broke the supply chain causing the logistics to fall through.

Unfortunately, the road to recovery looks tough. Yields on India’s treasury bills are also at their lowest, while there is a rise in fiscal deficit and a fall in tax collection.

If all goes well, then we can hope to see the GDP reach 0 by the fourth quarter.

The only sector which made a positive GDP contribution in this quarter was Agriculture, but unfortunately, it isn’t taxed, so it couldn’t benefit the treasury in any way.

The only solution to this problem is to create more labour by creating more demand and fixing the logistics.