Is India’s GDP better than USA, Canada? A big NO

After the government data release of the GDP in second quarter of the financial year 2020-2021, there were many myths in representing the data. Many places I got to see that India’s GDP is at the worst among all other countries of G20. Whereas certain representations also stated that the loss of USA, Canada and some other countries are way bad than that of India. But what is the truth? Let us throw come light on the same.

Actual figures of GDP comparison of the G20 countries

Many people came out with a graph showing that the GDP of India is way better than that of USA, Canada. But the face is that the comparison that is represented is wrong. The data showed USA GDP at -33%, Singapore at -42.9%, Canada at -38.7%. But the actual figure is below

The above figure is a screenshot from the twitter handle of Gita Gopinath, the chief economist of International Monetary Fund.

The ruling party explanations – The finance minister in one of the press conferences stated that such a downfall of GDP is Act of God. This statement seems to be good explanatory but in real this statement seems to be pure baseless.

Let us assume for a moment that the GDP loss is because of the pandemic. However, if we compare the graph of previous quarters, there was a subsequent decline. Look below

Some of the main reasons of the above decline

·         Demonetization – In an overall perspective GDP of any country depends on the demand that come from people. And when there will be no demand, the GDP would go low consequently. At the time of demonetization, people had to face a lot of problem to spend cash in the market which eventually had a very bad impact in the market.

·         GST - We all know that GST is one of the best moves in India. But does this have any significant impact on the country’s GDP? Implementation of GST had a direct impact on the price of products and business. Which ultimately had a very bad impact in the market, where people spent less because they would have to save money for future at any cost rather than spending on not very necessary products. And more over GST is not standard across all sectors. For food industry the GST is something, for Motor industry the GST is something. There is no uniformity.

·         Inflation – Usually it happens that when there is less demand, the price of essentials would go down. But the case has become entirely opposite in Indian market. Prices are touching the sky at most of the sectors in the market. Most essentially the vegetables which had a very high demand in the entire market stays at the peak when it comes to pricing.

A report from world bank says that more than 12 million Indians would be pushed under poverty due to this crisis.

Comparison of GDP of India and UK

Because of the above wrong steps taken by the government, the GDP is -23.90%. Above India the country which has next major loss is United Kingdom. There too the wrong step of Brexit in 2019 held their economy face such a huge loss.

My View – The government must take necessary steps to overcome the situation and stop giving explanations. They should work on real causes to retain and regain the lost GDP, to make it positive. They should focus on how to make people spend to regain the market stats. Before any implementation in the country, expert advice must be taken to withstand losses. Single handedly taking any decisions could lead to nowhere but losses.