Slowdown Is Everything, Hope Is Just Agriculture Sector?

     

It was understood before epidemic that the state of the economy was shaky enough. GDP contraction was guaranteed in the first quarter of the current financial year. However, its drop of 23.9 percent has frightened many. The bad news was more. In April-July, the fiscal deficit reached Rs 6.21 lakh crore in these four months. In other words, it has exceeded the deficit target for the whole year. At the same time last year, the deficit reached 7.8% of the target. The prolonged lockdown across the country has led to a decline in revenue from taxes and other sources on the one hand, and an increase in spending in various sectors in the epidemic situation on the other. On the same day, news came that the production of the country's eight major infrastructure industries had declined by 9.7% in July. The news of some relief is that even though the production of those industries has decreased for five consecutive months as compared to April, they have turned around a lot. It was down 36% in April. Another piece of bad news for the week is the six-month contraction in the service industry until August. All in all, the country's economy is in dire straits.



       

All sectors except agriculture have dragged down national production. The biggest declines were in the construction industry (50.3%), hotel and transport (48%), and manufacturing, mining, and quarrying industries (23.3%). However, due to the normal monsoon, the country's agriculture and related production increased by 3.4% during the crisis. Many are blaming the long lock down across the country at the beginning of epidemic for such a fall in national production. GDP has shrunk at a much lower rate than in some large economies.

Thousands of unfavorable news could not suppress the stock market for so many days. The index did not collapse last week but finally pushed back a bit. At the beginning and end of the week, the Sensex fell 739 and 634 points, respectively. In all, the Mumbai index lost 1,110 points to 36,358 during the week.

Although the situation was bad in all respects, the tide of foreign investment kept the market strong for so long. The idea of ​​foreign investment companies is that India's economy will outperform many other countries in the race to turn around. Not looking at the current situation, they are investing in looking to the future. Although the lock down has been relaxed in four phases, the business community has complained that business and transportation of goods have not been able to return to normal due to the ongoing regional lock down in different states. As a result, production and sales are suffering. As a result, the concerned quarters think that it will take more time for the industry to turn around. Until then, the stock market may remain volatile. However, if foreign investment continues, the risk of a big fall will decrease. In this case, it is important to keep in mind the nature of the epidemic. We need to know when the corona antidote may come in handy. Once vaccination begins, the market may pick up again.