Ordinarily that would have been a disaster. In the current circumstances of a massive pandemic, this might be sort of a relief. Thank God, it is not worse. But to be honest, if we leave aside the performance of the farm sector and additional public expenditure, the contraction is estimated at around 35 per cent, which shows the actual hit the private sector economy has suffered.

So, all said and done, the farm sector is the silver lining and its growth by 3.5 per cent in the first quarter augurs well. With more or less adequate monsoon that we are seeing this year, the agriculture economy should spring back into life in the current year. With that we can reasonably expect a spike in rural demand.

Remember, the Indian economy was riding on one horse: consumption demand. That had flagged since the monetisation days. Now, the covid pandemic had driven another nail and the NSO figures indicated private consumption demand to have slumped 27 per cent in the first quarter. Once overall consumption expenditure starts improving on the back of strong resurgence in farm income, the growth process should re-start.

The policy interventions that should now come are clear. The government should earnestly start implementing the various farm related schemes which were announced by finance minister Nirmala Sitharaman as part of overall stimulus package. Infrastructure building at farm gates, building cold storages in rural areas, infrastructure for post harvest start ups, and the whole host of announcements made.

Farm sector should now be converted into a growth engine, in short. This should be done right now, when the other sectors are in deep trauma.

And why not. The whole world is in a similar state, excepting of course China where growth is reported to have rebounded, which is ether being misreported or has to be conceded as an economic miracle.

This contraction is plainly the direct end-result of the covid pandemic and the lock downs which had started from March 25 and continued for the greater part of the first quarter and even later. While the figures showed how seriously the covid infection hit the Indian economy, the skeptics point out that the slide would possibly be even deeper.

This is because for most of the time during the first quarter, the NSO could not actively collect figures for the different sectors and these figures are more as estimates rather than based on actual collected data.

The areas where contraction was the most pronounced were in air traffic which went down by 94 per cent, steel consumption was down by 56 per cent and sales of automobiles went down by 84 per cent.

Among major sectors, manufacturing was down by 40 per cent, mining by 22 per cent and electricity generation by 15 per cent. The railways have suffered a huge jolt with passengers movements almost down totally (-94 per cent). Likewise air passenger movement was also nil.

The tourism sector has possibly been worst hit and the figures reveal that. Trade, hotels, transport and communications dipped by 47 per cent. With international flights still deferred, no wonder that India’s international air traffic will continue to show sharp contraction.

An inevitable macro-level impact of the shrinkage is the sharp drop in revenues. While government consumption expenditure has increased to around 18 per cent of the GDP, the fiscal deficit slipped deep past the target levels.

While the government had fixed fiscal deficit target of 3.5 per cent of GDP, this is already estimated at 4.6 per cent. According to figures released by the Comptroller and Auditor General reviewing the government finances, revenues stood at only 11 per cent of the budget estimates in the first quarter, against 20 per cent in the corresponding period last year. Direct tax collection stood at Rs 1.49 lakh crore, against Rs 2.21 lakh during the same period last year.

The chief economic adviser however struck a hopeful note claiming that the high frequency data in more recent months indicate the beginning of a kind of recovery of the economy. He claimed that the recovery should be a “V” shaped one, implying that with the deep contraction over, the recovery should be very sharp.

These figures however do not reveal the most important aspect of the economy, that is, employment levels. The employment figures have been estimated earlier through some payrolls statistics but that would be confined to only the organised sector. It is important that employment losses are regained. Because without that growth of consumption demand could be stymied after a while. And in this process, the informal and small scale sector are of crucial importance.

The major part of the employment in the country would be in the small informal sector and these have been affected badly, even well before the covid infection spread and lock-downs were imposed. The informal sector was hurt by the twin hits of demonetisation followed by the introduction of the GST. One believes that these sectors should now recover faster with the liberal credit regimes announced during the government’s introduction of recovery packages. (IPA Service)