What made the decline of the GDP and how can it be revived?

So, The GDP we all know is declining and has reached to a historical point of -23.9%, well this is the lowest ever recorded decline since the liberalisation. So what’s really behind that? To know about it we need to first know about the engines of the GDP growth.

There are namely five factors that play the role to grow GDP of any country and by these five elements it is calculated and here they are:-

1.Consumer Expenditure.

Consumer expenditure by the term itself explains it’s concept and therefore is one of the main element behind the decline in the GDP. As compared to the last year Q1 this year it showed a massive decrease which is roughly -27%. This happened because of the income deduction which lead to less consumption by the people and resulted in steeper fall in demand.

2. Business Investments.

The business investments has also seen a massive decline as compared to the last year Q1. It is about a 50% less than the previous year, which means private business are not ready to invest in the commodities. Now this leads to no tax revenues or say less tax collection. This is not only for the FY20 but in FY19 we saw this comming in Q3 decline and that proves to be lack of government efforts to improve the situation.

3. Government.

If you’ve been following the Economical Times for a long time you may have seen them mentioning that their is a slight increase in the government expenditure. Which here statistically means 16% raise than the FY2019 Q1. Well we should know that if the expenditure increases of any sort and the revenue is not even close to it the GDP will look like the way it is looking now.

4. Exports.

Exports has also been hit hard this year. Knowingly from the last year itself the economists were mentioning and showed their fear about the slight decrease in exports. The government then tried to boost the other businesses to contribute and try export goods of our own but it didn’t work, make in India campaign in its earlier days was at good pace but then came down by shutting of large number of companies.

5. Imports.

Since the liberalisation we have never ever seen less imports and more exports here and yet it is still the dream of many of us in this field to see that scenario but as if for now we have increase import to our nation. This is also because of the shutting down of the companies and high pace of population growth. Trusting only foreign brands is still a thing in our country.

So how can we revive our economy?

Well to revive the economy there is only one engine or factor that can do the recovery and that is government. As we know that the expenditure of government is high right now so the government has to lower it’s expenditure and should invest in building up the infrastructure or else giving salaries to individuals in order to maintain the liquidity in the country. Many of you would ask me how building up roads and bridges would bring revenue? To answer that building up any infrastructure helps in generating indirect revenue.

Now coming on to other sectors, now these factors are voluntary work as business investments and consumer expenditure all of it are by individuals. Decline in income will lead to decline in buying behaviour and which will result in less business investments and activities. The same is for exports and imports.

So in the end I just want to say that I think this is not recession but depression instead and it’s only the government that can rectify this problem. Now if they spend money in the right direction, if they do so we can recover in mid term but if they don’t then it would take a long time.

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