The International Monetary Fund has revised down its growth forecast for India. It now reckons that the economy would contract by 4.5 percent in the current fiscal. Considering that GDP growth in 2019-20 was a paltry 4.2 percent, the contraction forecast by the IMF would push the economy in the negative region. This point needs to be emphasized given that Central ministers have begun to claim seeing the ‘green shoots of the economy’. Where these green shoots are and when they will flower to yield fruit remains unclear to all barring the members of the ruling party. Citing select figures for May over last April is misleading. The Railways claim to have moved 26 percent more freight last month than in the previous month of the lockdown does not suggest anything of wider significance. April being the first full month of the complete lockdown, it saw little or no economic activity. The gradual opening up of the economy in May naturally resulted in a partial freight movement since neither the Railways nor the general economy was fully back on stream. Similarly, a higher consumption of petroleum products in May as against April signifies very little. These are, therefore, not the green shoots of the economy. Far from it. Even a cursory look at the once busiest market places in major metropolises reveals a complete lack of demand. Far from the revenge buying spree as expected by some after more than 100 days of lockdown, traders are lamenting the absence of shoppers. Whether it is out of fear of the coronavirus, which is still not under control, or consumers have decided to cut down on discretionary spending in view of shrinking incomes, signs of a crippled economy are there for all to see. Yes, it would have made sense if they had compared the freight traffic last month with that in May last year. Or petroleum products consumption last May with the corresponding month in 2019. Whether or not the idea was to talk up the economy, the truth is that things look pretty bleak at present. If IMF has felt constrained to lower its previous growth figure for India, it noted it was doing so due to the continuing threat of the pandemic resulting in the suspension of economic activity and massive job losses.
Manufacturing activity is far from returning to normal. Consumer durables have lost the sheen for lack of demand. Aviation and hospitality sectors remain shuttered. The auto sector is seeing very poor demand. Opening after three months of the lockdown, distributors of both commercial and passenger vehicles as also of two-wheelers have reported negligible sales. Media and entertainment sector is creeping back to life, albeit in an attenuated state, but is set to suffer huge deceleration in the current fiscal while the prognosis for the next too is far from rosy. On top of it all, the outbreak of hostilities at the India-China border has injected an element of uncertainty. It would not only discourage fresh domestic and foreign investment, but would entail a greater portion of revenues being diverted towards defence of the country than any time before. However, due to the disruption caused by the pandemic, revenue growth is set to be way off the budgeted targets. Under this twin whammy of slow growth and shrinking revenues the official anxiety for green shoots of growth will remain a mirage. Yes, the one sector which is doing well is agriculture. There was a record Rabi harvest and bumper procurement. Kharif sowing has witnessed a huge spurt in the sale of fertilizers over the last financial year. Due to the reverse migration of workers to villages, there is a big jump in demand for work under MGNEGRA. Agriculture accounts for about 15 percent of GDP. By itself it cannot be enough to revive growth. All sectors of the economy, especially manufacturing and exports, are still in the grip of the lockdown-induced slowdown. Exports have to reckon with the global slowdown as well. In such a bleak scenario, talking of green shoots of the economy is unrealistic.