A significant drop in industrial output, massive reduction in power demand were among the many signs of a slowing economy
Even before the COVID-19 outbreak, which led to a shutdown of the economy and made way for the worst contraction of India’s GDP in decades in the April-June quarter, the economy was already witnessing a slowdown.
Decelerating GDP growth, significant decrease in industrial output, fall in tax revenues and a massive reduction in power demand were all recorded well before the impact of the lockdown was recorded.
GDP growth has been on a constant downward slope since Q4 FY17, and slowed to a 11-year-low of 3.1% in Q4 FY20. The nationwide lockdown due to COVID-19 began in the last week of that quarter.
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Industrial activity had also taken a hit well before the pandemic set in, with the output of the eight core sectors (bar) and the index of industrial production (line) contracting between August and October 2019.
The chart shows growth in gross tax revenue, which decelerated to -19.8% y-o-y last December.
The next chart shows growth in GST collections (blue bar), which had also been slowing since early 2019, though it recovered towards the end of the year. The y-o-y growth of compensation cess (red line), levied on luxury and sin goods and used for compensating States for GST shortfall, also witnessed deceleration.
Also read: Comment | Making up for shortfalls in GST collection
Another indicator of a slowing economy is power demand. This had dropped by 13.2% in October 2019, the steepest fall in 154 months. The chart shows the y-o-y % change in electricity demand.
Source: MOSPI, Office of Economic Adviser
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