Economic catastrophe in India is yet to come!

 04 Jun 2020 ( IBTN Bureau )
POSTER

The corona epidemic has also severely affected India's economic health. The Government of India is also not denying this and saying that it is trying its best to bring the country's economy back on track.

But the foundation of the states on which India's economy rests has been shaken by Corona. In such a situation, questions are arising that how difficult and challenging will the economic revival of India be?

In fact, among the states that have the highest share of India's GDP, Maharashtra is at number one and Tamil Nadu at number two and Gujarat at number three. Corona has been hit badly on these states, the number of cases of infections and deaths is constantly increasing, it has broken the back of the economy of these states. Its direct effect was also seen in the latest GDP figures released on Saturday.

It is to be noted that the figures released for GDP include only 7 days of lockdown. The figures for the economic loss in the lockdown have not yet come. Statistics of the destruction of India's economy during the lockdown are yet to come. Moody's has said that India's GDP will fall by 4 percent. That is, economic catastrophe is yet to come.

Mumbai, the capital of Maharashtra, is called the economic capital of India. It houses the headquarters of large corporate and financial institutions. Bollywood is the world's largest film industry in terms of viewership in Mumbai. Maharashtra is also the second largest producer of cotton, sugarcane and banana in the country.

The state is well connected to major markets, with four international and seven domestic airports. There is a road network of about three lakh kilometers and a railway network of 6,165 kilometers. The state has a coastline of 720 kilometers and has 55 ports. Where about 22 percent of the country's cargo is transported.

The gross state domestic product of Maharashtra was $ 387 billion in 2017-18 and the state contributed 15 percent to the country's GDP.

But the corona epidemic has badly affected Maharashtra. The highest number of cases have been reported here so far. The lockdown imposed to control cases of corona infection has had a direct impact on the state's economy. All business has stopped. The film industry is closed. Import and export work has stopped. All this has caused a lot of economic damage to the state of Maharashtra.

The largest number of factories in India are in Tamil Nadu.

The manufacturing sector of Tamil Nadu is quite diverse. There are many industries here including automobiles, pharma, textiles, leather products, chemicals.

Tamil Nadu has excellent infrastructure. The road and rail network of this state is considered very good. There are also seven airports. Tamil Nadu has 1,076 km, the second longest beach in the country. Where there are 4 Major and 22 Non-Major Ports.

Tamil Nadu accounted for 45 percent of the total auto exports from India in 2017-18. In the case of passenger vehicles, Tamil Nadu is the export hub, with Tamil Nadu accounting for 70 percent of India's total exports in passenger vehicles. Chennai, the capital of Tamil Nadu, is the automobile capital of India. Tamil Nadu makes the largest number of tires in the country.

The GSDP (gross state domestic product) of Tamil Nadu stood at $ 229.7 billion in 2018-19. Tamil Nadu is the second highest GDP state in the country.

But Corona has greatly affected Tamil Nadu due to which the lockdown imposed to avoid it stopped all economic activity. Factories had to be shut down and the auto sector, which was in a bad phase, came into worse condition. This caused a lot of financial damage to the state.

Gujarat is the second largest producer of crude oil (onshore) and natural gas. Jamnagar has the largest petroleum refining hub in the world. In addition, Gujarat is the global leader in processed diamonds. It is the third largest producer of denim in the world.

The state of Gujarat has more than 30,000 food processing units in the state. There are 560 cold storage and fish processing units.

According to the National Logistics Index 2019, Gujarat is number one in terms of logistics in India. There are 49 ports in Gujarat, of which one is Major Port and 48 is Non-Major Port. There are also 17 airports in Gujarat, including an international airport.

In 2017-18, Gujarat recorded exports of $ 66.8 billion. Which was more than 22 percent of India's total exports. Looking at the 2016-17 figures, Gujarat's GSDP stood at $ 173 billion.

Delhi, ranked second in terms of per capita income, is one of the fastest growing regions in India. Its growth rate in 2018-19 was 12.82 percent.

The national capital of India, Delhi is quite popular among tourists. Trade fairs and conventions are also held throughout the year. There is also an attractive real estate market here and great potential for agrochemical based products. The National Capital Region (NCR) in and around Delhi is known for livestock and diary products. The diary here has a capacity of three million liters of milk every day.

India's largest metro rail network is also in Delhi. The GSDP of Delhi has been $ 109 billion in 2018-19.

But due to Corona virus, the metro rail had to be closed. Tourism halted. Business activities halted. All of this had a significant impact on Delhi and then India's economy.

But due to the corona virus attack, all these economic activities in India had to be stopped. Due to which the states were damaged and this had a direct impact on the economy of India.

Maximum corona cases are being registered in Maharashtra. Then there are states like Tamil Nadu, Delhi and Gujarat.

Due to more cases, most of the areas here have been in the red zone. Where economic activity during the lockdown has been negligible. Due to which there has been a lot of economic loss.

However, no official data has been released about the damage caused by the lockdown. But Soumya Kanti Ghosh, Chief Economic Advisor of SBI Group, along with her team, has written a report, which was released on May 26, before the GDP figures were released. In this report, it was estimated that the total GSDP of the states due to Corona epidemic has resulted in a loss of 30.3 lakh crore rupees in gross state domestic product. Which is 13.5% of the total GSDP.

The maximum damage (50 percent) occurred in the red zone, where there are the most cases. Almost all major districts of India are in the Red Zone. The losses incurred by including Orange and Red zones constitute 90 percent of the total losses. The lowest losses occurred in the green zone. Because 80% of the population of this zone lives in rural areas, where almost all the activities were open.

When India's total GDP figures were released on Saturday, it was found that in the fourth quarter of the current financial year, the country's growth rate has come down to 3.1 percent as compared to the previous year. This brought the GDP rate for the entire financial year to 4.2 percent, the lowest level in 11 years.

According to a report by SBI Group's Chief Economic Advisor Soumya Kanti Ghosh, state-wise analysis shows that 75 percent of the total GDP loss was due to 10 states.

Maharashtra has a 15.6% share in the total losses, followed by Tamil Nadu with a 9.4 percent share in GDP losses and Gujarat with 8.6%. These three states have recorded the highest number of corona cases.

If we look at the sector, only agriculture has improved. Whereas in other large sectors, the situation has been very bad in most. Looking at the data for the fourth quarter of the current financial year, net sales in most sectors have been negative.

Net sales have been 15 in the automobile sector. Net sales of electrical appliances have been 17. Cement's net sale has been 10. FMCG has a net sale of 4. The textile had a net sale of 30. Steel's net sale has been 21.

However, figures from healthcare, IT sector and pharma have been somewhat positive.

The lockdown also affected import-export, as well as tourism income.

Now the question arises that what is the way forward?

According to Soumya Kanti Ghosh, Chief Economic Advisor of SBI Group, one has to get out of the lockdown very sensibly. Their report says that there is likely to be some change in the consumption pattern even after the corona epidemic.

According to the Nielsen report, two types of customers will decide the consumption dynamic. One middle income group, whose income was not affected much in the lockdown and the other, those who lost their jobs and who were worst affected. Rather, the former will spend too much thoughtfully, because he will think that it may be my turn now. They will also buy cheap things. Despite the relaxation of restrictions, most people will eat home food. However, people will spend on health, safety and quality.

If this happens, it is clear that in the coming times, there may be a lot of downward trend in the GDP figures. That is, there is still a storm of economic devastation in India!

 

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