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Time for a Massive Fiscal Stimulus

Only bold interventions by the government can ensure a quick recovery of the economy.

The unprecedented 23.9% decline in the gross domestic product (GDP) in the first quarter of 2020–21, mainly due to the stringent lockdown enforced after the COVID-19 outbreak, is not only larger than expected but is also, most probably, an underestimate. This is because the quarterly GDP growth numbers do not capture the trends in the informal sector, which accounts for around half the GDP, and which has remained turbulent in recent years. Yet this sharp fall in growth has made India one of the worst affected COVID-19-hit economies.

Gross value added numbers show that, except for agriculture, which grew by a respectable 3.4%, all the other seven major segments of the economy have registered a contraction. The largest decline was in manufacturing, construction, and trade, hotels, transport, and communication where output fell by 39.3%, 50.3% and 47%, respectively. These three segments ­account for almost three-fourths of the total workers employed outside of agriculture and the sharp fall in output would have wiped out millions of jobs.

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Updated On : 7th Sep, 2020

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Biden’s policy of the “return to the normal” would be inadequate to decisively defeat Trumpism.