India’s GDP plummets to a new low

India’s gross domestic product (GDP) has been having a steady decline over the past 5 years but the unexpected change in dynamics due to the pandemic has pushed the GDP of the country over the edge. The country’s GDP has fallen by 7.3% in 2020-2021 and that is the biggest hit the GDP has taken since India got its independence in 1947.

The COVID-19 pandemic brought about unforeseen stress factors upon the economy and the added pressure of lockdowns and the restrictions on movement and trade has caused the economy to dip into new lows, which is an occurrence that has not taken place since 1979.

The last time this happened was just a few years prior to the beginning of the 1980s. It was caused then due to drought in the country as well as the doubling of crude oil prices as a consequence of the Iranian revolution that was taking place in the Gulf. Even then the GDP contracted by 5.2% which is still 2.1% less than the current status of the GDP.

The only sectors that have managed to survive this dip are the ones providing indispensable needs. Agriculture including forestry and farming and basic service providers that provide electricity and water are the ones who have made it through in one piece.

The one glimpse of hope that the country has is the Reserve Bank of India (RBI). To reinvigorate the economy of the country is that the RBI boosts the supply of money in the economy. The RBI is soon scheduled to look over its credit policy in the coming week. The increase of money supply will give rise to funds for anything that is needed to help increase economic activity and growth but on the downside may also give rise to inflation and there forms the dilemma.


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