India's GDP decline of 23.9 per cent for the June 2020 quarter has generated heated debate. A stringent lockdown, necessitated by the worst global pandemic in 102 years, was enforced with the idea of saving lives and rightfully so. Thanks to the lockdown, India's track record is superior, with a fatality rate below two per cent.
In fact, every major global economy contracted sharply in the June quarter. India was not alone. While the USA reported a staggering 32.9 per cent annualised crash in GDP growth, the comparable fall was 42.9 per cent for Singapore, 38.7 per cent for Canada, 12.1 per cent for Eurozone, 10.1 per cent for Germany, a steep 20.4 per cent for UK and a massive plunge of 27.8 per cent in Japan. In India's case, we at least had a bright spot, with the agriculture sector growing by a healthy 3.4 per cent in the aforesaid quarter.
Another fact that deserves attention is the GDP data pertaining to the March 2020 quarter. Much before the pandemic struck, while India's GDP grew at only 3.1 per cent, what has to be acknowledged is: we were the only big economy to report positive growth in the March quarter, with agriculture growing by a solid 5.9 per cent. Other economies like the USA, for instance, contracted by 4.8 per cent, Germany by 2.2 per cent, Eurozone by 3.8 per cent and China actually saw a steep GDP fall of 6.8 per cent in the March quarter. The global ratings giant S&P says, India will have a V-shaped recovery, with a projected GDP growth of 8.5 per cent for 2021-22,far higher than its international peers.
Thanks to stellar reforms by Prime Minister Narendra Modi in the last six years, India became the fifth largest economy in the world, surpassing the United Kingdom in February 2020 and the 6th largest, after overtaking France in 2019. The media has been screaming hoarse about India's biggest GDP drop in 40 years but fails to inform that on the positive side, India's policy REPO rate, at 4 per cent in the last six years, is the lowest in 58 years. The coal sector was denationalised and coal mining was privatised for the first time in 2019-2020, after 47 years. Banking consolidation by merging 10 public sector banks into 4, starting April 2020,has happened for the first time in 51 years.
The country's foreign exchange reserves swelled to a record high of $538.191 billion. The best part is, short-term trade credit is just 18.2 per cent of overall external debt. Again, over 66 per cent of the aforesaid accretion in forex reserves in the past one year is accounted for by stable and high-quality FDI and not fickle FII flows.
Is the worst over? The answer is a decisive 'Yes'. Take the GST revenues for August, for instance, which stood at Rs 86,449 crore. Despite the lockdown, this was 88 per cent of the GST collected in the same month last year. Overall, 48.3 million e-way bills were generated in July, almost back to the pre-Covid levels of 55.3 million bills in January 2020.
Again, Indian Railways' freight loading for August 2020, at 94.33 million tonnes, was 3.31 million tonnes higher compared to August 2019. The CBDT has so far issued refunds of over Rs 88,652 crore, to more than 24.64 lakh taxpayers from April 1, 2020 onwards. The manufacturing purchasing managers’ Index (PMI) stood at 52 in August, up from 46 in July. Amounts sanctioned under the emergency credit line guarantee scheme ( ECLGS), by public sector banks increased to Rs 76,044.44 crore as of August 18, 2020. Similarly, private banks sanctioned loans to the tune of Rs 74,715.02 crore under the ECLGS, pointing at a swift uptick in the economy.
More importantly, let Modi naysayers not forget that US$20 billion is what India attracted as investments and pledges from 15 companies, in just three months, from April to July 2020, during the pandemic. This $20bn is a massive vote of confidence for Modinomics, by some of the world's largest and richest corporations like Google, Facebook, Walmart, Samsung, Apple, Saudi Arabia's PIF, SGS, Axtria, etc. Taiwanese company Pegatron is the fourth Apple supplier to decide to set up a base in India, after Foxconn, Wistron and Compal Electronics have pledged billions in India's journey towards becoming a global electronics hub.
Suffice to say that India is not alone, every global behemoth has been adversely impacted by Covid. But unlike others, India has a vibrant rural economy, accounting for over 50 per cent of our workforce. News has it that Australia is facing its worst recession in 30 years, China's food shops are running out of supplies and the USA might end the year with a 4.2 per cent drop in consumption. In sharp contrast, India is doing a far better job in dealing with the Wuhan virus.
At his US-India Strategic Partnership Forum (USISPF) address,Prime Minister Modi said, "We are future-proofing India in every way, enabling New India to take off." Well, Modi's words have found resonance. India's Hero Motocorp, for example, the world's largest two-wheeler company that derives over 65 per cent sales from rural areas, reported a healthy 7.6 per cent YoY growth in overall sales, selling 5.8 lakh units in August 2020. Ditto for M&M, that derives over 50 per cent sales from rural India--it saw a robust 28 per cent YoY rise in overall tractor sales in July 2020. Maruti Suzuki saw a 21.3 per cent growth in car sales in August, while Tata Motors saw a splendid 154 per cent growth in auto sales.
Indeed, since auto sales are a lead indicator, India's September quarter GDP should see a sharp bounce-back, aided by government spending, which is moving ahead full throttle, undeterred by the pandemic.
The writer is an economist, the chief spokesperson for BJP Mumbai and the bestselling author of 'Truth & Dare--The Modi Dynamic'.