The Indian economy was in its worst phase even before the coronavirus outbreak, with growth in the

gross domestic product (GDP) falling to a 11-year low of 4.2 per cent in 2019-2020. The economy grew
by 3.1 per cent in the January-March quarter of 2019-2020, against 5.7 per cent at the same time a year
ago, the slowest growth in at least eight years.

According to National Statistical Office data, the manufacturing sector has grown merely by 0.03 per
cent in FY 2019-20 compared to 5.7 per cent in the previous year. The growth of the construction sector,
which is responsible for a spillover effect on several other industries, too declined to 1.3 per cent.

Gross capital formation has also remained low in FY 2019-20, while the growth of deposits in banks
declined to 7.9 per cent, compared to 10 per cent in the previous fiscal — hinting at low-level savings.
Bank credit growth more than halved to 6.1 per cent, compared to the previous fiscal’s 13.3 per cent,
that shows people’s consumption too will be lower.

The data comes a time when the country is likely to enter Lockdown 5.0, with a few exemptions, to curb
the spread of coronavirus infections. Hit by the lockdown of over two months, many businesses, reeling
due to the worst slowdown, shut operations, leading to lakhs of job losses.

“Due to a 2.8 per cent contraction in investment and 3.6 per cent fall in exports, real GDP growth has
fallen to 4.2 per cent in 2019-20, which is the lowest since 2008-09 when it was 3.1 per cent. On the
output side, there has been a fall mainly in manufacturing, construction as also in the two heavyweight
service sectors — trade, hotels, etc, and financial and real estate services,” said D.K. Srivastava, EY
India’s chief policy adviser.

“India is thus facing a problem of falling investment and savings and an acute problem of Covid-induced
lockdown. In 2019-20, gross capital formation at current prices, as a proportion of GDP, has fallen to
29.7 per cent of GDP. By implication, the saving rate is estimated at 28.7 per cent in 2019-20. At the
same time, its fiscal capacity to combat these challenges is weakened due to sharply contracting tax
revenues of the Central government. In 2020-21, the growth outcome will depend on the balance
between the positive contribution of agriculture and public administration and defence services, and the
subdued performance of manufacturing, construction and the two heavyweight service sectors,” he
explained.

Weather forecasts for normal monsoon rains offer hope that the rural sector can help support millions
of migrant workers who returned to their villages from the cities when the lockdown began.
Hitting out at the BJP government, Congress leader P. Chidambaram said he predicted Q4 GDP growth
would touch a new low at below four per cent. “It has turned out to be worse at 3.1 per cent. This is pre-
lockdown. Of 91 days of Q4, the lockdown applied to only to seven days. It’s a telling commentary on
the BJP’s economic management,” Mr Chidambaram said.