ISC ECONOMICS PROJECT 2

Comparative Analysis of different Economic Indicators

ASHMIT SAWHNEY
11H1
 INDEX

1. INTRODUCTION 2

2. COMPARTIVE ANALYSIS OF DIFFERENT ECONOMIC INDICATORS 3

3. GROSS DOMESTIC PRODUCT 3

4. CONDITION OF EMPLOYMENT/UNEMPLOYMENT 6

5. THE STATE OF POVERTY 9

6. HUMAN CAPITAL FORMATION 11

7. CONCLUSION 13

8. BIBLIOGRAPHY 14

1
 INTRODUCTION

The COVID-19 pandemic has probably given the biggest blow to the world economy after
the great depression of 1930s. Around 60 per cent of the world population is either under
severe or partial lockdown without having medical solution to the coronavirus and economic
activity across countries has either stalled or significantly decelerated taking away millions of
livelihoods. As a result of the pandemic, the global economy is projected to contract sharply
by −4.9 per cent in 2020, much worse than during the 2008–2009 financial crisis
(International Monetary Fund [IMF], 2020).1 India being densely populated country with
inadequate medical facilities was left with no option but to follow the policy of lockdown.
World economy is heading for a recession and India is no exception. The current pandemic is
working its way through a highly globalized world with interconnected production networks
and financial markets. The fall out of the COVID-19 on Indian economy is going to be huge
because of its own lockdown, which was necessary to contain the spread of coronavirus, and
also because of India’s integration with the rest of the world.
The aim of this project is to carry out time series analysis with respect to improvement or
deterioration in different economic indicators and make recommendations to the government
as a policy thinker.

2
COMPARITIVIE ANALYSIS OF DIFFERENT ECONOMIC INDICATORS
UNDER COVID-19

1. Gross Domestic Product (GDP)

Gross domestic product (GDP) is the total monetary or market value of all the finished
goods and services produced within a country’s borders in a specific time period. As a
broad measure of overall domestic production, it functions as a comprehensive scorecard of
a given country’s economic health.
GDP can be calculated in three ways, using expenditures, production, or incomes. It can be
adjusted for inflation and population to provide deeper insights.

India's GDP Calculation Process

The GDP in India is calculated using two different methods, leading to different figures that
are nonetheless close in range.

The first method is based on economic activity (at factor cost), and the second is based on
expenditure (at market prices). Further calculations are made to arrive at nominal
GDP (using the current market price) and real GDP (inflation-adjusted). Among the four
released numbers, the GDP at factor cost is the most followed figure and reported in the
media.

The Factor Cost Figure:

The factor cost figure is calculated by collecting data for the net change in value for each
sector during a particular time period. The following eight industry sectors are considered in
this cost:

1. Agriculture, forestry, and fishing

2. Mining and quarrying
3. Manufacturing
4. Electricity, gas, water supply, and other utility services
5. Construction
6. Trade, hotels, transport, communication, and broadcasting
7. Financial, real estate, and professional services
8. Public administration, defence, and other services

The Expenditure Figure:

The expenditure (at market prices) method involves summing the domestic expenditure on
final goods and services across various streams during a particular time period. It includes
consideration of expenses towards household consumption, net investments (i.e., capital
formation), government costs, and net trade (exports minus imports).

3
India’s GDP Growth Rate over the last 20 years:

(Figures in percentages)

• India’s long-term economic growth has steadily accelerated over a fifty-year period,
without any prolonged reversals. Thus, while growth averaged 4.4 percent a year
during the 1970s and 1980s, it accelerated to 5.5 percent during the 1990s-early
2000s, and further to 7.1 percent in the past one decade. The acceleration of growth is
evident not just for aggregate GDP, but even more strongly for per capita GDP. The
average pace of per capita growth was 5.5 percent a year in the last decade.
Interestingly, when compared with some of the world’s largest emerging economies,
this steady acceleration of growth stands out as being unique to India.
• Second, India’s rate of growth has become more stable. This is partly due to the
stabilization of growth within each sector – agriculture, industry and services – and
partly to the transition of the economy toward the services sector, where growth is
more stable. Particularly interesting is the sharp increase in the stability of GDP
growth since 1991. Before this, growth accelerated episodically, was punctuated by
large annual variations, and often failed to sustain. Thus, growth has not just
accelerated post liberalisation, it has also become more stable.
• Third, growth has been broadly diversified. Growth has accelerated the fastest in
services, followed by industry, and less so in agriculture. Over the long run, India’s
growth has been driven by an increasing share of investment and exports, with a large
contribution from consumption. Growth has also been characterized by productivity
gains – both in labour productivity as well as in total factor productivity.
• Finally, growth has been broadly resilient to shocks, both domestic and external. The
resilience of India’s growth can be attributed to the country’s large and spatially
diversified economy, as well as to its diversified production structure that is not
dependent on a few products, commodities, or natural resources. It can also be
attributed to India’s diversified trade basket and broad range of trading partners,
wherein a slowdown in any one part of the world will not result in a large impact on
India.

4
Covid-19 Impact on Gross Domestic Product
According to statistics provided by the National Statistical Office under the Ministry of Statistics and
Programme Implementation (MOSPI), India’s GDP increased by 4% in FY20; however, it contracted
by 7.3% in FY21. With a potential of a revival in consumption and investment in the third quarter of
2021, India's GDP growth rate for FY22 is projected to be 11% (Economic Survey 2020-21).

The fallout in economic growth is grounded on the weak response of economic fundamentals.
Most importantly the sluggish demand in the country and globe amid shutdown will be a pull
factor for slowdown. With rising uncertainties, the deferment of investment reduces the
employment opportunities and further lowers the disposable income thereby pressing the
demand on lower side (see, Garg & Sahoo, 2020). The unemployment due to COVID-19
pandemic runs into millions across countries. Further, there is mounting pressure from supply
side as the lock-down in India and across the countries gave a severe shock to supply chain
(Ozili & Arun, 2020). The domestic production networks are experiencing the shortage of
raw materials, components and forced to bear the higher cost. The manual labour supply
chain has been badly disrupted and the close down of industries lead to loss of skills who are
tuned to industrial processes. The banking sector—the major financer to economic activities
and backbone of India’s financial sector—witnessed rising NPAs with falling revenues of the
corporate sector, MSMEs and falling income of households. The bad balance sheet with
rising NPAs will limit the credit flow thereby undermining the effect of liquidity measures
taken by RBI in terms of selling bonds to the banks and reducing the repo rate.
The Government of India proposed several fiscal and monetary relief to encourage growth
and build a self-reliant India amid severe economic repercussions of COVID-19 and
subsequent lockdown restrictions. On June 28, 2021, Mrs. Nirmala Sitharaman, Union
Finance & Corporate Affairs Minister, announced a series of measures to lend relief to
various sectors hit by the pandemic's second wave.

5
The Rs. 6.28 lakh crore (US$ 84.9 billion) relief and
stimulus package focuses on enhancing healthcare
facilities (especially for children), extending
inexpensive credit loans to small firms in the
agriculture, exports and tourism sectors, and
temporarily waiving off visa fees to attract foreign
tourists. This package is the fourth edition of relief
measures extended to individuals and businesses in
tandem with efforts to boost the economy amid
COVID-19. The relief package comprises a total of 17
measures including additional subsidy for DAP
(Diammonium Phosphate) and P&K (Phosphatic and
Potassic) fertilisers, and extension of the Pradhan
Mantri Garib Kalyan Anna Yojana (PMGKAY) until
November 2021.

2. Condition Of Employment/Unemployment
Unemployment is a term referring to individuals who are employable and actively seeking a
job but are unable to find a job. Included in this group are those people in the workforce who
are working but do not have an appropriate job. Usually measured by the unemployment
rate, which is dividing the number of unemployed people by the total number of people in the
workforce, unemployment serves as one of the indicators of a country’s economic status.
There are two types of unemployment in India- Rural Unemployment and Urban
Unemployment
Rural Unemployment
Around 70 per cent of India’s population lives in villages. Agriculture is the single largest
source of their livelihood. Agriculture suffers from a number of problems like dependence upon
rainfall, financial constraints, obsolete techniques, etc. Rural unemployment can be of
following three types viz. open, seasonal and disguised.
Open Unemployment
In the agricultural sector, there are large numbers of landless workers who are openly looking
for work. Open unemployment or chronic unemployment is a situation where a large number
of labour force does not get work opportunities which will get them regular income.
Seasonal Unemployment
In India, we have mostly unirrigated land which is capable of giving only one crop a year. Our
farmers remain unemployed from 3-8 months a year. They have not tried to find any alternative
occupation for themselves in this period like road building, brick making, house construction,
digging wells, etc. Out of laziness our farmers fail to utilise their spare time, i.e., there is
widespread seasonal unemployment.

6
Disguised Unemployment
In India, there is too much pressure of population on land. As a result, productivity per person
falls. Disguised unemployment is a situation where workers are apparently employed but their
marginal productivity is zero or negative.

Urban Unemployment
Urban Unemployment is mainly of three types -Industrial Unemployment; Educated
Unemployment and Technological Unemployment
Industrial Unemployment
Unemployment among industrial labour has assumed alarming proportion as the modern
industrial development based on latest capital intensive technology has not been able to absorb
the ever increasing labour force. Lakhs of people pour into cities every year from the distant
rural places in search of jobs and better living standards. But the slow growth of industry and
the fixed capital coefficient in the modern industrial sector make it impossible to provide jobs
to the migrated labour force. This causes widespread unemployment among the industrial
workers.
Educated Unemployment.
The curse of unemployment is also severely inflicting the urban educated middle class
people. The massive expansion in the education facilities-both at the school and the university
levels, greater enrolment of people in educational institutions and the widespread craze for
having university degrees, have all contributed to the growth of educated persons who are on
the look out for white collar jobs.
Technological Unemployment
Technological upgradation is taking place in all spheres of activity. People who have not
updated their skills in the latest technology become technologically unemployed.

India’s Economic Growth Rate over the last 20 years:

7
How has the situation of employment been affected with the outbreak of the pandemic?
In April 2020, the International Labour Organisation (ILO) estimated that nearly 2.5 crore
jobs could be lost worldwide due to the COVID-19 pandemic in 2020. Further, it observed
that more than 40 crore informal workers in India may get pushed into deeper poverty due to
the pandemic.
Unemployment rate remains notably higher than the pre-COVID period
To contain the spread of COVID-19, a nationwide lockdown was imposed from late March
till May 2020. During the lockdown, severe restrictions were placed on the movement of
individuals and economic activities were significantly halted barring the activities related to
essential goods and services. Unemployment rate in urban areas rose to 20.9% during the
April-June quarter of 2020, more than double the unemployment rate in the same quarter the
previous year. The lockdown restrictions were gradually relaxed during the subsequent
months. Unemployment rate also saw a decrease as compared to the levels seen in the
April-June quarter of 2020. During the October-December quarter of 2020 (latest data
available), unemployment rate had reduced to 10.3%. However, it was notably higher than
the unemployment rate in the same quarter last year (7.9%).

Figure 1: Unemployment rate in urban areas across all age groups as per current weekly
activity status (Figures in %)

Measures taken by the government for workers

The Standing Committee on Labour in its report released in August 2021 noted that 90% of
workers in India are from the informal sector. These workers include: (i) migrant workers,
(ii) contract labourers, (iii) construction workers, and (iv) street vendors. The Committee
observed that these workers were worst impacted by the pandemic due to seasonality of
employment and lack of employer-employee relationship in unorganised sectors. The
Committee recommended central and state governments to: (i) encourage entrepreneurial
opportunities, (ii) attract investment in traditional manufacturing sectors and developing
industrial clusters, (iii) strengthen social security measures, (iv) maintain a database of

8
workers in the informal sector, and (v) promote vocational training. It took note of the
various steps taken by the central government to support workers and address the challenges
and threats posed by the COVID-19 pandemic (applicable to urban areas):

▪ Under the Pradhan Mantri Garib Kalyan Yojana (PMGKY), the central government
contributed both 12% employer’s share and 12% employee’s share under
Employees Provident Fund (EPF). Between March and August 2020, a total of Rs
2,567 crore was credited in EPF accounts of 38.85 lakhs eligible employees
through 2.63 lakh establishments.

▪ The Aatmanirbhar Bharat Rozgar Yojna (ABRY) Scheme was launched with effect
from October 2020 to incentivise employers for the creation of new employment
along with social security benefits and restoration of loss of employment during the
COVID-19 pandemic. Further, statutory provident fund contribution of both
employers and employees was reduced to 10% each from the existing 12% for all
establishments covered by EPF Organisation for three months. As of June 30,
2021, an amount of Rs 950 crore has been disbursed under ABRY to around 22
lakh beneficiaries.

▪ The unemployment benefit under the Atal Beemit Vyakti Kalyan Yojana (launched in
July 2018) was enhanced from 25% to 50% of the average earning for insured
workers who have lost employment due to COVID-19.

▪ Under the Prime Minister’s Street Vendor’s Aatma Nirbhar Nidhi (PM SVANidhi)
scheme, the central government provided an initial working capital of up to Rs
10,000 to street vendors. As of June 28, 2021, 25 lakh loan applications have been
sanctioned and Rs 2,130 crore disbursed to 21.57 lakh beneficiaries.

The central and state governments have also taken various other measures, such as increasing
spending on infrastructure creation and enabling access to cheaper lending for businesses, to
sustain economic activity and boost employment generation.

3. The State of Poverty

Before 2005, the official measure of poverty in India was based primarily in food security.
Poverty has been defined as that situation in which an individual fails to earn sufficient
income to buy him bare means of subsistence.
The poverty line has been defined largely in terms of food poverty. Poverty line is defined as
the per capita consumption expenditure level to meet average per capita daily calorie
requirement of 2400 kcal per capita per day in rural areas and 2100 kcal per capita per day
in urban areas.
All those persons who cannot undertake consumption expenditure required for the minimum
calorie intake fall bellow the poverty line (BPL). The extent of poverty is measured by a

9
headcount ratio, i.e., estimating the number of persons whose overall per capita consumption
expenditure is below the poverty line and measuring them as the proportion of population.
India’s poverty figures over the last 20 years:

Poverty headcount ratio at national poverty lines (% of population) in India was reported at 21.9 % in 2011,
according to the World Bank collection of development indicators, compiled from officially recognized sources.
India - Poverty headcount ratio at national poverty line (% of population) - actual values, historical data,
forecasts and projections were sourced from the World Bank on January of 2022.

Problem of Poverty During Covid-19

Our estimate using the Periodic Labour Force Survey (2018-19) data at an assumed level of
5-10 per cent of contraction in income/consumption shows that the impact of Covid-19 on
poverty is humongous. We have used the Rangarajan committee’s estimates of the poverty
line for the year 2011-12 for estimating Covid-induced increase in poverty. Consumer price
indices for the rural and urban area (base year, 2011-12) are used separately for updating the
poverty line of the year 2011-12, for the year 2019-20 and 2021-22. Assuming that there are
no substantial changes in income and its distribution in the year 2019-20, we estimated
Covid-induced poverty at the aggregate and disaggregated level. Our estimates show that
around 150-199 million additional people fell into poverty this year. It means an overall
increase in poverty by 15-20 percent, making around half of the country’s population poor.
The increase is higher in rural areas as compared to urban areas.
In pre-Covid times, around 35 per cent (265 million people) of the rural population was poor.
However, this number is expected to rise to roughly 381-418 million, with the total headcount
ratio reaching 50.9-55.87 per cent in 2021-22. Under the same levels of contractions, urban
India expects 36 to 46 million additional people to fall under poverty, with the total
headcount ratio reaching 39.08- 42.4 per cent. Across social categories, a higher percentage
of people from marginalised groups are expected to fall into poverty than the other groups.

10
For instance, at an all-India level, around 13-20 per cent of additional SC/ST people are
expected to fall into poverty as compared to 12-16 per cent of upper caste people making
total HCR for the group reaching a whopping 60-70 per cent. The Covid-19 induced poverty,
therefore, leads to widening disparity between SC/ST and non-SC/ST groups.
The government is focused on alleviating the poverty of Indian households with schemes like
The Mahatma Gandhi National Rural Employment Guarantee Act 2005 (MNREGA),
National Rural Livelihood Mission (NRLM), Pradhan Mantri Awaas Yojana-Gramin
(PMAY-G), Public Distribution System (PDS), Housing for All, the Atal Mission for Urban
Rejuvenation and Transformation (AMRUT), Smart Cities Mission, Digital India, Jan Dhan
Yojana and Make in India.

4. Human Capital Formation in India

Human capital refers to stock of ‘skill, knowledge, ability, physical capacity and expertise’
embodied in humans. Human capital is as important as physical capital for economic
development.
Human capital formation is the process of adding to stock of human capital over time. Human
capital can be developed through creation of skilled, trained and efficient labour force by
providing better education, health care facilities, etc. Highly skilled people can create new
ideas and methods of production. Thus, expenditure on education, on health and on on-job-
training are key instruments of human capital formation. Expenditure on education is one of
the most important ways of enhancing and enlarging a productive workforce in the country.
Expenditure on health can create more efficient and more productive human capital. Further,
on-the-job-training helps workers to update skills. Training enhances the productivity and is
expected to accelerate the process of human capital formation.
Education Sector and Covid-19
India has the world’s second-largest school system, after China. Shutting schools to maintain
social distancing during the COVID-19 crisis was the most logical solution to avoid
community transmission in the initial response to COVID-19, given uncertainty over
transmission rates among school-aged children and the potential impact of the virus. All
education institutions in India were temporarily closed in March 2020. As India went into
lockdown at the end of March 2020, most schools were wrapping up the 2019–20 academic
year. By May, amidst the upsurge in COVID-19 cases across the country, it became clear that
it would not be possible to resume in school classroom sessions for the new academic year. In
April 2020, the Ministry of Human Resource Development (renamed the Ministry of
Education in July 2020 in line with the NEP) presented the Alternative Academic Calendar
for Students (AAC)39 guidelines on continuing formal school education online. The AACs
are a set of four documents – one each for primary, upper primary, secondary, and higher
secondary schooling – that outline measures for educators to ensure continuity in curriculum
learning from the safety of students’ homes through a blend of online and offline activities.
The closures have affected millions of learners across India from pre-primary through
secondary levels of schooling. Although a lot of digital content has been generated and

11
transmitted to help children continue to learn from home, there is limited evidence on the
extent to which this content is actually reaching children, whether they are engaging with it
and the impact it is having on their participation and learning.
Health Sector and Covid-19
With the COVID-19 pandemic testing even the more developed healthcare systems globally,
the foundations of India’s healthcare system have naturally also been shaken. The overall
response to the pandemic witnessed both the private and government sector working in
tandem. The private Indian healthcare players rose to the occasion and have been providing
all the support that the government needs, such as testing, isolation beds for treatment,
medical staff and equipment at government COVID-19 hospitals and home healthcare.

India’s private healthcare sector has contributed significantly and accounts for about 60 per
cent of inpatient care. Most private facilities initiated their plans in response to the COVID-
19 pandemic, which involved significant investments to prepare facilities for controlling and
preventing the infection, building infrastructure for quarantine and treatment, and equipping
the facility with suitable medical supplies and additional workforce. Additionally, hospitals
and labs witnessed a sharp decline in revenue due to delayed medical tourism and elective
processes (the pandemic is speculated to trim the private hospitals’ operational profit by
approximately 40 per cent this fiscal year). The OPDs (outpatient departments) had also been
closed almost throughout the year as per the government advisory.
The healthcare industry, along with the central and state governments, undertook a robust
response plan to tackle the pandemic by setting up of dedicated COVID-19 hospitals,
isolation centres and tech-enabled mapping of resources. In order to effectively manage the
outbreak, the Indian government also leveraged technology and developed various
applications both at the central and state-levels. The Aarogya Setu mobile app which assisted
in syndromic mapping, contact tracing and self-assessment was widely used throughout the
country. Such technology platforms were used to supplement the response management,
which included delivery of essential items in containment zones, tele-consultations with
patients, bed management and real-time monitoring and review by the authorities.

Relief packages/ programmes initiated by the government to improve the situation of these
sectors.

Health Sector

Key measures include a holistic approach to strengthen healthcare with focus on three areas-
Preventive, Curative, and Wellbeing, Rs. 35,000 crores for COVID-19 vaccine, roll out of Made-in-
India Pneumococcal Vaccine across the country, launching of a new centrally sponsored scheme PM
AtmaNirbhar Swasth Bharat Yojana in addition to National Health Mission, Mission Poshan 2.0,
Universal Coverage of Water Supply, Urban Swachh Bharat Mission 2.0, Clean Air, Scrapping policy,
etc.

Education Sector
Key measures include qualitative strengthening of 15,000 schools under National Education Policy,
setting up of 100 new Sainik Schools, Higher Education Commission of India, Central University in
Leh, 750 Eklavya model residential schools in tribal areas, revamped Post Matric Scholarship Scheme
for welfare of SCs, measures to enhance skilling like realignment of existing National Apprenticeship
Training Scheme (NATS), etc.

12
 CONCLUSION
India is already falling short in meeting its growth expectations in the last two FY. The GST
collection is also not at par. The situation of COVID-19 is aggravating the financial health of
the country even more worsen. As per the UN report, India will be impacted by $348 Mn on
its trade due to Corona Virus. The figure shall increase even further depending on the period
of lockdown, locally & globally. Hence, Null Hypothesis has been proved successfully that
there is a significant relationship between the happening of COVID-19 and fall of Indian
Economy.
It is expected that in the short term the price of logistics, transportation, freight and many
other services will rise. The Government is taking all possible measures to handle it
efficiently however the exact impact shall only be known once the corona period is over. The
economy is expecting no. of financial packages (5% to 10% of GDP) to overcome this
historical slowdown. The Government till date has announced two financial stimuli (INR 1.7
lack crore and approx. 1 lakh crore along with 17000 crores to the state governments) to
boost the sentiment of the industries and the people. More stimuli are expected and believe to
be in pipeline. Apart to this, the Government should also consider few more steps as under:
1. To cut various fiscal rates such as repo rate.
2. The tax rebate in the export should be continued.
3. The tax collection may also be rationalized hence industries will look for relaxation in the
GST as per the need of the hour.
4. DBTs (Direct Benefit Transfer} should be exercised more effectively.
5. Availability of Working Capital and Loan facilities shall require to be more friendlies.
6. The expenses on Govt. Machinery must be brought down especially on transportation,
salaries, comfort, events, etc.
7. There should be a good coordination & belief situation between Central Government and
the State Governments.
On the positive side, India can also consider this situation as an opportunity to increase its
export to the various part of the world. Overall, it is expected that India will be able to curb
this pandemic even more efficiently than its counterparts hence shall display speedy recovery
on economic parameter too. The Government is required to give priorities to the economic
measures to boost the economy along with obvious social & political agenda.

13
 BIBLIOGRAPHY
1. https://www.researchgate.net/publication/342332567_Impact_of_COVID-
19_on_Indian_Economy-_A_Review
2. https://pib.gov.in/PressReleasePage.aspx?PRID=1696278#:~:text=Some%20o
f%20the%20salient%20achievements,and%20the%20needy%20were%20prov
ided.
3. https://www.worldbank.org/en/publication/human-capital/brief/the-human-
capital-project-frequently-asked-questions#HCP2
4. https://prsindia.org/theprsblog/impact-of-covid-19-on-unemployment-in-
urban-
areas#:~:text=In%20April%202020%2C%20the%20International,poverty%20
due%20to%20the%20pandemic.
5. https://www.ilo.org/wcmsp5/groups/public/---dgreports/---
cabinet/documents/publication/wcms_756331.pdf
6. https://www.jagranjosh.com/general-knowledge/definition-poverty-poverty-
line-in-india-1448357553-1
7. https://www.macrotrends.net/countries/IND/india/poverty-rate
8. https://www.investopedia.com/terms/g/gdp.asp#:~:text=Gross%20domestic%
20product%20(GDP)%20is,a%20given%20country's%20economic%20health.
9. https://blogs.worldbank.org/endpovertyinsouthasia/india-s-remarkably-robust-
and-resilient-growth-
story#:~:text=First%2C%20India's%20long%2Dterm%20economic,in%20the
%20past%20one%20decade.

14