India has registered -23.9% growth in quarter 1 of the financial year 2020-21 amid the strict lockdown from March to May 2020. Though it was very much expected, the internet is flooded with a wave of pessimism after the release of official data. The real question is, whether is it really a cause of concern? My answer to this question is NO. It is not a cause of concern as it was expected after the Coronavirus pandemic, but yes, some actions need to be taken at the individual level to bounce back as quickly as possible. I am going to divide this article into two parts, one focusing on how the Indian economy is already recovering and second, on how individuals like you and me can help it bounce back as quickly as possible.
Let me briefly talk about economic indicators. There are three types of economic indicators, namely leading indicators, coincident indicators, and lagging indicators. Leading indicators are indexes of things that take place before you see the changes in the overall economy. Coincident indicators are indexes of things that take place along with the changes in the overall economy. Lagging indicators are indexes of things that take place after the changes in the overall economy. Leading indicators can help you sense the future changes in advance and make predictions about them. Coincident indicators can help you understand ongoing things and gauge their direction. Whereas, lagging indicators can help you understand the effects of past economic changes or events.
The GDP is a lagging indicator and -23.9% is something that happened between April and June 2020. We have passed that stage already. What is more important now is to look at what the leading indicators are indicating. That will help you understand what you can expect in the future. I am attaching a list of leading indicators below to explain why I said negative growth in the first quarter of this financial year is not a matter of great concern.
Manufacturing Purchasing Managers’ Index (PMI) helps us understand the leading changes in the manufacturing industry. It can be easily seen that it is already showing the sign of the recovery.
Index of Industrial Production
Index of Industrial Production (IIP) helps us understand the growth in manufacturing. Though IIP is still in negative territory it is still showing the sign of economic recovery. It also confirms the data shown by Manufacturing PMI.
Services Purchasing Managers’ Index (PMI) helps us understand the leading changes in the services industry. The sign of economic recovery is very much evident in the service sector also, which contributes more than 65% of the GDP.
Car Registrations, Cement Production, Steel Production
Car Registrations, Cement Production, Steel Production are considered as the leading indicators because they indicate the future movement in economic activities. All these three indicators are showing the sign of recovery.
After looking at all the above leading indicators, one can clearly say that we have already crossed the darkest time of the Coronavirus pandemic. The Indian economy is again ready to spread its wings and head high in the sky. Though the economy is already showing the sign of economic recovery, efforts from all the sections of the economy are needed to boost the speed of the recovery. The government and the private sector are already performing their duties. Now it’s time we, the household sector, can also contribute our bit into this fight back.
I am going to list down 7 points through which common people can help to boost our economic growth. You can choose one or two points that apply to you and work on that.
1. Big Purchases
This is probably the best time to go for big purchases. The market is down. Businesses are eager to sell out their inventories. They are ready to cut down on their profit margins and give you bigger discounts. So, if you were planning for house purchase, car purchase, buying furniture, or consumer durables like a television set, refrigerator, or washing machine then this is the right time for you to make that deal.
2. Invest your savings in IPOs/ Government Bonds/ Entrepreneurs
If you are from the luckier lot who is working from home and getting a full or decent salary and saving more money due to reduced monthly expenditure, you probably must be thinking about where to invest the additional savings. Prefer investing in the IPOs of the Indian companies. You can invest in government bonds and help the government which is already going ahead with deficit spending. Speak to your investment advisor or financial planner, they will help you understand how you can invest in government security.
Tough times bring many opportunities. This might be the right time to take some additional risk with your money if your risk appetite is more. Find out an entrepreneur who is in the need of the money or lacks working capital due to the national lockdown and lend him money. You can ask for higher returns on this high-risk investment. If you know someone who has lost his job then encourage him to start something of his own and fund his venture with your additional saving. Maybe you can consider this as a charity for returns.
3. Plan for Diwali
I understand the situation outside is still quite scary and who might think of the celebration in such a tough time but maybe this is the time when we need it the most. Plan how you are going to celebrate your Diwali. Of course, by taking all the precautionary measures for Corona. If you have your job and still getting monthly income then you can plan how you are going to spend your money in the festive season. This year, you can plan for 10 to 20% higher spending than your usual festive season budget.
If you have lost your job or you are experiencing huge pay cuts then this the time for you to make some additional money. In the festive season, people do spend money and that’s the time when you can be creative. Identify the needs of the people in the festive season especially when we are still fighting with the pandemic. You can come up with some wonderful ideas to satisfy people’s needs and earn money.
4. Made in India
There is already a good amount of awareness about local buying and Aatmanirbhar Bharat. I am not going to repeat the same point. I know right now we all are boycotting Chinese products. I also support it wholeheartedly but when it comes to economic recovery, for some time till we come back to normal, we need to buy whatever is Made in India. As it will generate employment and help us distribute income in a better way. So even if the company is a foreign company or even a Chinese company, as long as they are producing in India you can buy their products. Some people might hate me for taking this stand but right now, for faster recovery it is important. Please remember I am recommending this only for a specific time. Till we come back to a normal growth path. In the long run, we need to boycott Chinese products more religiously.
5. Online Workshops
In the time of lockdown, we have seen a sudden rise in the online workshops and various activity classes. Those who have skills are trying to make money by selling their skills through online workshops and classes. There is nothing wrong with doing so. Yet, I would request those who are still earning must avoid spending money on online workshops and classes organized by people who have resources to fund their survival. You can spend this money on items that give money to someone who has lost his resources to fund his family’s survival.
No offense to anyone but those who have resources must understand that when the water in the well starts drying up it is always better to think about how we can distribute it to all for their basic survival needs, rather than thinking about how we can accumulate more water if it doesn’t rain tomorrow. Maybe you can still organize online workshops or classes but think about doing it for the sake of passion. You can keep it free of cost or charge nominal fees. Know that once you gain your market share you can certainly start charging when things go back to normal.
6. Create Small Jobs
We all know that due to corona many marginal and domestic workers have lost their jobs and income. Those who are getting monthly income and can afford to spend some money can plan for creating small jobs at least in the short run. Maybe you can rent out services like buying groceries or medicines, delivery of milk and other essentials, cleaning your vehicles, watering the plants in your society, etc. There is n number of ways in which you can create this kind of micro-jobs. This can help in the economic rehabilitation of some of the people who have lost their jobs in the pandemic.
7. The New Beginning
The last point is for all those who have lost their jobs. I understand that you must be going through a lot of tough times but remember, calamities bring opportunities along with them. So, if you have lost your job then rather than searching for a new job, it is the right time to think about starting something of your own. However small it can be. This is the time when banks will be more than willing to lend you money. Reach out to people who trust you. They will be ready to fund your new venture. Remember, this is not the end, this is the new beginning.
I have tried my best to suggest the solutions which can help us bounce back as quickly as possible to the best of my knowledge of economics. Some of you might find some points impractical or maybe crazy, but I have always believed what Steve Jobs says “it is the crazy people who have the ability to change the face of the world”. So be the crazy one and let us together build our economy back. Just believe that the phoenix will rise again from its ashes.