Market News

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V Shaped Economic Recovery – How it Will Happen?

V-shaped recovery is characterized by quick and sustained recovery as measures of economic performance after a sharp economic decline.  V-shaped recovery is one among the shapes a recession and recovery chart is expected to take.  V-shaped recoveries are generally caused by rapid readjustment of consumer demand and business investment spending.  V-shaped recovery considered as best-case scenario once an economy has hit a recession and the subsequent rapid adjustment of the economy.

Let us examine, if V-shaped recovery of India is it possible or not, in the current scenario? The elements to be examined are if we are doing enough to generate consumer demand, and business investment – two vital criteria associated with V-shaped recovery.   India, with1.3 billion population and majorly informal economy went ahead with strictly lockdown in the world.  As a result, major chunk of the Indian population witnessed their income almost halves and vanished.  It is estimated that 2.1 crore salaries jobs lost during the pandemic, crippled business forced thousands of small companies to shut down and led to large numbers of layoff according to Market Research. A quick street walk will realize the number of shops shut down and number of commercial places available for let out.

Private consumption is solution for the growth of economy at any point of time.  Now, the question is the ability of the country to boost private consumption as well as business investment.  Due to pandemic and associated fears, general consumer reduced spending like before because of lost jobs or short saving in their accounts.  Agriculture is also answer for that but we have to wait, if consumption increases due to recent increase in agricultural output.

In the month of October, there are reports of movement of high frequency indicator toward board based resurgence of economic activity, notably in health, rail freight, power report of rebound of GST collection (around 1 lakh crore) and record transaction online.  Consumption of petroleum products also increased in months of September and export rebounding continuous year by year positive growth for the first time in last months.  Meanwhile, India also received highest ever total foreign direct investment inflow of $35.72 billion for the first five months of 2020 which is 13% higher than last year fiscal year.  Mostly, these changes are due to slow opening up of economy after the lockdown and subsequent change in statistical numbers.  Also, we can say that due to festival season, there will be increase in consumption of people in food sector, clothing, and online transactions.  This can stop after that and may have slowdown in coming period.  This will have impact on economy to slow down it.

Now, it is for the government to come up with the idea of creating jobs and effort to increase spending on infrastructure development.  This will help to boost up economic activities, increase business investment, and generate jobs.  Some economist said that, economy can have U & W shaped recover in India.  U-shaped means little slow recovery than V-shaped, like not instant, but it will.  W-shaped means instant recovery for some period and then instant decline and then more high recovery than before period of decline.

Whatever the shape of it, we can just hope best for the economy, nation and for the people living their lives for the loved one.  We need ask the Rich to spend so that the poor can sustain.  Thus, those with surplus in their hand spend for renovating houses, buying consumer goods, generating local job in their neighborhood which will help the have-nots to earn some amount during this down time.  This along with the combined spending from government appropriate Business Planning on infrastructure, healthcare, housing, road, transport, water supply, and sanitation may result in V-shaped recovery.   Now, all measures from the government need to be focused on create safe environment in order to help to the public to move out of their house and enter into economic activities.  Further, each one of us can contribute to economy if we make effort from our side to make earning.  We need to adapt to the new norms, wear mask and stay safe, the only vaccine for now.

In the absence of generating consumer demand and increasing business investment, it would be remote for us to recover at U or V or W shaped recovery.

DART Consulting provides business consulting through its network of Independent Consultants.  Our services include preparing business plans, market research, and providing business advisory services through the network of Independent Consultants.  More details at https://www.dartconsulting.co.in/dart-consultants.html

 

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