On August 31 the Union government released data which shows that India’s economy shrank by a record 23.9 per cent last quarter – the biggest jolt to a major economy caused by the pandemic. It is evident from the fact that in April the demand for electricity dropped by a massive 23 per cent which means manufacturing industry was heavily affected. The demand for the same however has come back to normal in August as compared to last year.
Gross Domestic Product (GDP) took a hit during April -June quarter compared with the same quarter a year earlier. According to the latest numbers from the Organization for Economic Cooperation and Development, India has registered the worst fall among all the major world economies that have announced GDP figures for the quarter and it is the worst decline since 1996, when it started reporting quarterly numbers.
Even a strict lockdown imposed in India, beginning late March, hasn’t been able to stem the spread of COVID-19. The country only managed to delay the spread, which continued to crush economic activity after the lockdown began easing in May just as outbreaks started to hit India’s densely populated cities. During this period, investment plummeted by 47 per cent in the quarter, while consumer spending fell by almost 27 per cent while the government spending grew by 16 per cent but was not enough to overcome the shortfall. All states have been affected by this fall in GDP, including Goa.
President of Manufacturing Association of Information Technology (MAIT) and former GCCI president Nitin Kunkoleinker said, “The GDP fall is attributable to the performance of most of the states. Most of the states have been very irresponsible and irrational. They have failed to take cognizance of the COVID-19 situation and its future impact. Everyone is in a sleep mode and corruption is still going on rampantly. Things are not moving when the demand has drastically reduced and the market is collapsing. The government should have looked into Ease of doing business, which is not happening.”
Kunkolenker further added, “The Chief Minister should go for immediate reforms in ease of doing business, e-governance and simplify procedures that will accelerate the business and that will lift the GDP by 1-2 per cent and at the same time generate jobs. There are many who feel it is a right opportunity to start investing but the Investment Promotion Board is virtually dead. It has become an additional window and not a single window. Our priorities need to be set right.”
Dr Joy Chowdhury, Assistant Professor of Economics and area chairperson of General Management and Economics in Goa Institute of Management (GIM) is of the opinion that negative real GDP growth for the first quarter of the FY21 is somewhat shocking but not totally unexpected due to the pandemic. The Central Government’s decision to impose lockdown was a bold attempt to save the nation from the COVID-19 crisis. The negative growth in GDP may be attributed towards the shrinkage in the demand side of the economy.
“Tourism, mining and agriculture used to be the back bone of the Goa’s economy. However, the recent ongoing pandemic is a severe blow to the tourism sector of Goa. We may witness a gradual improvement of the economy in post lockdown periods. We need to emphasis more on mining, tourism, agriculture and SMEs to accelerate the growth in GDP and employment. Being well connected through road, sea and railway route Goa may become education and IT hub of the western part of India and that can foster the economic growth with ample employment opportunities,” added Dr Chowdhury.
Associate Professor in Department of Economics of Birla Institute of Technology & Science, Pilani in Goa, Dr Mridula Goel believes that the pandemic has serious impact on overall economic activities but some of the worst hit sectors are tourism, travel, hotels, restaurants. Mining and construction activity are badly hit which are the key contributors to Goa’s GSDP.
“Further the Union government has not focused on demand side measures to boost the economy. The need to keep fiscal deficit down and low tax collections possibly are a barrier to boost spending. Further as Goa is a spending-led economy and consumer State, dependent more on visitors, it is bound to be worse off. Not only are persons staying away from travelling for leisure but as incomes shrink the demand for tourism is likely to remain low. Tourism industry service providers are coming up with huge offers, hitting their costs, but still the prices are not succeeding in boosting the industry. Welfare payments by the government to migrant workers and millions in both organised are unorganised sectors are almost non-existent. Such transfers are being used in several other countries to support spending and GDP. Loss of migrants is creating supply side challenges in the State,” added Prof Goel.
Immediate past President of Goa Chambers of Commerce and Industries (GCCI) and a noted Charted Accountant in Goa, Sandip Bhandare opines that with the COVID-19 pandemic and consequent full lockdowns both by Centre and State, it was expected that the GDP would show a substantial decline. However, the lower than expected GDP numbers have affected the public sentiment.
“The Goan economy being heavily dependent on mining and tourism has certainly been severely impacted in recent months. The delay in receiving the GST compensation from the Centre has also deprived Goa of urgent funds. However, as the unlocking of activities including the opening of hotels and the recent opening of State borders gathers pace, there is strong possibility of a faster recovery. Of course, there will always be looming uncertainty on account of the rising COVID-19 cases in Goa, and it is only when the vaccination and cure is found that we can look for a steady revival of the economy,” added Bhandare.
Another renowned Chartered Accountant of Goa, Parimal Kulkarni said that the Pandemic is like a third world war situation against a virus, which yet does not have a vaccine. Health related measures have to have the top priority. Interim solutions by way of physical activities, immunity boosters and steam, social distancing, work from home options can help us all overcome this pandemic.
“Each one of us need to follow precautions and maintain social distancing. Short term to long term solutions are necessary for revival of Goan economy. Efforts can be made to revive the agricultural sector to produce essential goods and services. Liquidity needs to be given to households by way of temporary relief in rates of taxes. Reducing government expenditure in non-essential services, additional deductions can be given for retaining employees and incentivising investments in labour oriented sectors are some of the measure that can also be looked at,” said Kulkarni.