Thread by @sgurumurthy

Surprised at how media is reporting on Q2 GDP. “Worst crash” “Economy in ICU” Fact is nation stopped working. So no production, no income, no spend. Only if nation works but doesn’t earn it is fall. It hasn’t worked at all. It is like cut in pay for not working. Illiterate media

World data of cut in GDP: US -33%,
UK -21%,
Singapore -42.9%,
Japan -27.8%,
France -14%
Canada 38.7%
Singapore 42.9% It is not as if cut is only in India. It is a global crises which has no relation to economics

Some people compare china’s 6% cut and ask why India’s cut is 4 times. China had lock down only in Wuhan and some cities in Hubei involving only 68 million people 5% of china’s population. en.m.wikipedia.org/wiki/COVID-19_…. Still it had a 6% cut. Entire India was locked down for 2 months

Mining, manufacturing, construction, trade, hotels, transport, storage and finance accounting for 2/3 (Rs 152 lac CR for whole year) of GVA stood shut for two months i.e a loss of 25lac cr less 5 lac cr stimulus is 20 lac cr or 35%. Actual loss of GVA is 23%.

It means that despite the shut down the sectors have performed better. GDP calculation for the shit down period should be made separate from the rest of the year. That will give some scope for reasonable debate, and respite from the current illiterate one

Some people go back to the pre covid period and ask what about the fall in GDP then. While the government RBI tussle was partly responsible, the whole world economy was shrinking, more than India’s. All economies were falling in 2019-20

One more interesting fact. If fiscal (not economic) stimulus of US 9%, Japan 28%, UK 8%, Canada 15%, China 7% India 2.6% which has reduced the GDP cut for Q2 is added Q2 GDP US will be (-) 42%, Japan (-) 68%, UK (-) 29% China (-) 13%, Canada (-) 52% India (-) 27%. Any views?

One correction. The drop in US GDP was 9.1%, annualised at 33%. But all media I saw has carried it as 33 for Q1. I went by that. But adding the fiscal stimulus of 9%, the real drop for US in Q1 is 18% without considering the multiplier effect of the fiscal stimulus.

The multiplier effect of fiscal stimulus also reduces the drop in GDP caused by dislocation because of Covid. The issue is whether the drop is because If economic causes or Covid 19. My argument is it is due to Covid 19, not due to economic causes.