Data | India's GDP was on a downward slope even before COVID-19 wreaked havoc

A significant drop in industrial output, massive reduction in power demand were among the many signs of a slowing economy

Even before the COVID-19 outbreak, which led to a shutdown of the economy and made way for the worst contraction of India’s GDP in decades in the April-June quarter, the economy was already witnessing a slowdown.

Decelerating GDP growth, significant decrease in industrial output, fall in tax revenues and a massive reduction in power demand were all recorded well before the impact of the lockdown was recorded.

GDP growth

GDP growth has been on a constant downward slope since Q4 FY17, and slowed to a 11-year-low of 3.1% in Q4 FY20. The nationwide lockdown due to COVID-19 began in the last week of that quarter.

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Industries affected

Industrial activity had also taken a hit well before the pandemic set in, with the output of the eight core sectors (bar) and the index of industrial production (line) contracting between August and October 2019.

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Tax collections

The chart shows growth in gross tax revenue, which decelerated to -19.8% y-o-y last December.

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The next chart shows growth in GST collections (blue bar), which had also been slowing since early 2019, though it recovered towards the end of the year. The y-o-y growth of compensation cess (red line), levied on luxury and sin goods and used for compensating States for GST shortfall, also witnessed deceleration.

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Also read: Comment | Making up for shortfalls in GST collection

Electricity demand

Another indicator of a slowing economy is power demand. This had dropped by 13.2% in October 2019, the steepest fall in 154 months. The chart shows the y-o-y % change in electricity demand.

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Source: MOSPI, Office of Economic Adviser

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