Mains Practice Questions

Approach

• Start with writing about what do you mean by V-shaped recovery.
• Discuss, with reasons if Indian economy has experienced V-shaped recovery.
• Conclude suitably.

Answer

V-shaped recovery is characterised by a quick and sustained recovery in measures of economic performance after a sharp economic decline. It is very apt to state that the Indian economy has recently experienced V-shaped recovery.

Supportive arguments

• Quarterly GDP Growth: The COVID-19 pandemic has been a human and economic catastrophe for India. Almost one-fourth of the country's economic activity was wiped out due to fall in domestic demand in wake of the strict nationwide lockdowns. India's GDP dipped a historic 23.9% in the first quarter (Q1) of 2020. The contraction narrowed down to 7.5% in the second quarter (Q2).
• Rise in Government Expenditure: Total expenditure of the government rose 48.3% on year-onyear basis in the month of November. On the other hand, capital expenditure shrugged off a three-month contraction and expanded 248.5%. This was mainly due to the introduction of the Atmanirbhar Bharat package.
• Revival of Imports/Exports: After dipping for 9 consecutive months, merchandise imports finally experienced a growth of 7.6% (y-o-y) in December 2020. The revival was led by gold, electronic goods and vegetable oils. India’s merchandise exports have reached pre-Covid-19 levels and exhibited a growth of 0.1% in December 2020.
• Financial Markets Surge: The COVID-19 pandemic kept the Sensex to a record low in late March 2020. However, it staged a strong recovery from the lows. Both the BSE and NSE indices finally wrapped up 2020 on a bullish note.
• IPO Market: During December 2020, the listings of two Initial Public Offerings (IPOs), aggregating Rs. 1,351 crore, took the total resource mobilisation through main board IPOs to Rs. 15,971 crore during 2020-21 (up to December 2020), marking a sharp rebound from Rs. 10,487 crore in the corresponding period of the previous year.
• Industrial Activity: Although industrial output remains volatile, contracting by 1.9% in November 2020 after a record expansion in October by 4.2%, industrial activity is finally turning around. The headline Purchasing Managers’ Index (PMI) manufacturing expanded in December 2020 to 56.4, a tick higher than November’s reading of 56.3.
• Record GST Collections: The gross Goods and Services Tax collections touched a record high of over Rs. 1.15 lakh crore in December - the highest since the implementation of the regime. The collection indicates that the economy continues to show signs of recovery after a stringent lockdown.