The Indian economy has suffered a severe setback as it registered a GDP growth of only 5.4 per cent in the third quarter of the ongoing financial year. Such a slump in GDP growth rate is quite strange considering the fact that during the first two quarters of the 2021-22 fiscal, the country had recorded 20.3% (April-June, 2021) and 8.5% (July-September, 2021) GDP growth, respectively. Thus, a higher growth rate was expected in the third quarter mainly for two reasons. Firstly, the third quarter falls during festive season and secondly the world has started limping back to normalcy as the severity of the pandemic is on the decline. The hope was further heightened as the vaccination process achieved remarkable success in India. By the beginning of the third quarter, more than 60 per cent of the country’s adult population was vaccinated, a feat which even some developed nations could not achieve.
But the growth figure tells a different story. People didn’t spend as much as was expected during the festive season. Moreover, the threat of the third wave also put a spanner in the path of economic growth. These two factors together have forced the revision of the country’s growth estimate from previously anticipated 9.2 per cent to 8.9 per cent in the ongoing fiscal. During the third fiscal, growth rates in all sectors of the economy were dismal. Agriculture, which had kept the Indian economy afloat during the most turbulent days in recent times, recorded only 2.6 per cent growth in the third quarter which was much below expectations. Similarly, the manufacturing sector could register only 0.2 per cent growth during the same period, while the growth in the construction sector shrunk by a huge 2.8 per cent. Stunned by such reversals, many economists believe that the prevailing global scenario should be taken into consideration before reaching any conclusion regarding the slump. They argue that the pandemic has largely destroyed the world economy and the rebuilding process will take considerable time. Until then, India will have to suffer from such reversals as the country is much a part of the global economic system.
It should be noted that despite the increase in government spending, private spending is still limited, which is acting as a stumbling block to the growth of the economy. For the Indian economy to grow, private spending must complement the government initiatives as it is not possible for the government alone to revive the economy to the pre-pandemic level. A recent report showed that the number of billionaires have increased in the country. This fact indicates that private investors are playing safe and putting money in sectors where the return is guaranteed. This is why while IT and allied sectors are showing impressive growth, whilst other sectors are struggling. Such lopsided growth cannot make the economy healthy. Rather, a balanced public-private partnership holds the key to the country’s economic growth.