01 GDP & Waning

Private
Consumption
• 21PGHR003- Aditya Mohapatra
• 21PGHR019- Arnav Goel
• 21PGHR022- Athul Vijay
• 21PGHR026- Bhavya Varshney
• 21PGHR041- Pallavi Juturu
• 21PGHR051- Neha Upadhyay
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Focus On GDP

• Economic Activity Rekindling

• Focus on 2021-Q1 GDP data
• Flaccid Private Consumption Numbers
 Private
03 Consumption
 Private
04 Consumption
 Private
05 Consumption
 Why is it worrisome?
Economy Driving Force
Private consumption, which had been the
economy's driving force for years, has fallen
to the bottom of the heap. This can lead to a
vicious cycle, in which weak demand leads to
a lack of investment appetite, despite the fact
that larger corporations' balance sheets have
improved.
Contraction of private
consumption
As the first wave of the pandemic hit, private
consumption contracted by to 26.2% on-year
in the June 2020 quarter and another 11.2%
in the September 2020 quarter, from an
already dismal 2% growth in the March 2020
quarter.
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Effect of pandemic
The Covid-19 pandemic’s second wave,
ensuing restrictions, continued hit to jobs
and incomes, and fear factor has held back
the Indian consumer. Missing fiscal push to
incomes. Globally, most economies that are
recovering rapidly are doing so on the back
of strong private consumption growth.
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Responses for Various Discretionary Expenditures Once Lockdown is

Lifted
The Crisis
• To recover from the Great Depression of the 1930s, it took more than ten years. The global economy
suffered another setback in 2008. 08
• Although lockdowns are a partial response to the epidemic, no government can overlook the
economic consequences. Every country relies on consumer spending to grow its economy.

• Repeated lockdowns and hit to employment-intensive service sectors. The employment-intensive

sectors in the Indian economy are agriculture, construction, and services sub-segments such as trade,
repair, hotels and restaurants, transport, social and personal services.

• While the strong monsoon has helped agriculture, government funding has aided construction.
However, the services sub-segments, which employ over a quarter of the workforce, have bore the
brunt of the lockdowns.
 Depleting Savings Cushion 09
2015-2020 December 2020 quarter
Savings gradually slipped Savings dropped to 8.2%
to 11% of the GDP of GDP

Till 2015 June 2020 quarter

Savings averaged Savings shot up to
13% of the GDP 20% of the GDP
 Weak Consumer Confidence 10
• RBI's consumer index survey indicated a slow consumption recovery

• The survey indicated a bigger hit to consumer confidence by the second wave than by the first
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• Indians were far from increasing their spending, given the persistent uncertainty on
employment and incomes

• June quarter showed that rural consumption has floundered because of the second wave and
loss of momentum in urban consumption as well

• But the future expectations index saw a mild improvement in July, due to the pace of
vaccination which may provide the much-needed fillip to demand, but still lower than what was
seen after the first wave
 Way Forward
12
• Four major drivers of Indian Economy
Private Consumption
Government Spending
Investment
Exports

• Consumption and Investment- main drivers of growth in India(account for 85 percent of GDP)

• Notable lack of consumption and investment demand had already persisted before the pandemic; COVID-19
heightened those trends

• India’s economic revival will be crucially dependent on demand generation by direct government fiscal
intervention
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Aggressive public investment on Strengthen MGNREGA in rural areas
infrastructure for a year or two- creates and expand it to urban areas- boosts
immediate employment ,infuses demand consumption demand
into the system

Universalise PDS for a year Temporary income support for short

-aids other purchases; revives term period through DBT can further
flagging consumer demand and augment consumption and aggregate
ensure food security demand in the economy
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Thank You