Friday, November 27, 2020

Economy grows by the very act of living.

"India's economy officially entered into recession as the second quarter GDP contracted at a slower pace of 7.5 percent compared to a massive 23.9 percent in the first quarter of the current fiscal." An economy is said to be in technical recession when it contracts in two successive quarters. Still it is very good news because performance in the second quarter was nearly 70% better than in the first. "The surprise was thrown by good performance by the manufacturing sector that showed marginal growth in the second quarter," having shrunk by 39.3% in the first quarter." The slightest positive after such an enormous negative is something to cheer about. "However, the private consumption shrank by 11.5% showing that bounce back in private demand is still some time away." Contracting for the eighth consecutive month, the output of eight core infrastructure sectors dropped by 2.5 percent in October, mainly due to decline in production of crude oil, natural gas, refinery products and steel." Coal, fertilizer, cement and electricity recorded positive growth. A blowout of natural gas well at Baghjan oilfield in Tinsukia district in Assam on 27 May 2020 killed 2 people and has caused widespread damage to the Dibru-Saikhowa National Park as well as to local habitations. An investigation showed that Oil India Ltd, a public sector company, was operating the well illegally without obtaining environmental clearance. The well was finally capped after 80 days, having caused extensive damage to surrounding areas. Economists advised caution in reading GDP figures. Kunal Kundu said that a "rather low GDP deflator has resulted in higher-than-expected real GDP growth". "After an uptick in early November, high frequency indicators are beginning to show fatigue," said Shashank Mendiratta. "We expect growth to remain negative in the third quarter and post a small positive growth in Q4," said Anagha Deodhar, and "We retain our FY21 GDP growth forecast to -7%," said Garima Kapoor. "Foreign direct investment (FDI) grew by 15 percent to USD 30 billion during the first half of the current fiscal, according to official data." Of this, billionaire Mukesh Ambani got the largest chunk in his businesses, Reliance Jio and Reliance Retail. "With India's GDP clocking a lower contraction of 7.5 percent in the September quarter, industry and experts expressed confidence of further recovery in he coming months and said government actions are bearing fruits." After the strictest lockdown for over a month, when life came to almost a standstill, it is only natural for economic activity to grow as people resume their struggle to survive. The government can destroy the economy. People make it grow. It is called life.   

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