Economic Growth Current Affairs - 2020

COVID-19: Fifth Recession of India

Since Independence in 1947, India has faced four recessions. According to Reserve Bank of India (RBI), the recessions occurred in 1958, 1966, 1973 and 1980.

Highlights

Recession is defined as the fall in economic activities of the country along with decline in sales, income and employment. India has so far seen four such negative GDP growth. In 1958, the GDP growth was -1.2%, in 1966 it was -3.6%, in 1973 it was -0.32% and in 1980 the GDP growth was -5.2%.

1958: Balance of Payment Crisis

The Recession that India faced in 1957 was due to Balance of Payment problem. It was mainly due to weak monsoon that affected the agricultural production badly. India then imported 60 lakh tonnes of food grains. This widened trade deficit of the country that in turn reduced foreign reserved to half.

1966: Drought

India fought wars with China in 1962 and with Pakistan in 1965. The wars affected the economy badly and eventually led to drought. The food grain production fell by 20% in 1966 due to droughts. India relied on its foreign imports to rescue its starving population.

1973: Energy Crisis

In 1973, the world faced its first energy crisis. The OAPEC (Organisation of Arab Petroleum Exporting Countries) proclaimed an oil embargo. Embargo is an official ban on trade with a particular country. The organization aimed at countries that supported Israel. This led to increase in oil prices by about 400%. India’s oil imports increased from 414 million USD in 1972 to 900 million USD in 1973.

1980: Oil Shock

The world witnessed an oil shock for the second time in 1980. This was due to decrease in oil production due to Iranian revolution. It further increased due to the Iran-Iraq war that followed the revolution. This created Balance of Payment crisis for India.

COVID-19 crisis

The current Economic crisis faced by India is the worst of all the previous recessions. The international organizations expect India’s growth to contract by 5% to 6.8%

AIIB approves 500 million USD for India

On May 8, 2020, the AIIB (Asian Infrastructure Investment Bank) approved 500 million USD to COVID-19 to India. The funds were aimed to scale up the containment efforts and strengthen the health system. This will help manage future outbreaks.

Highlights

The funds are to be used for Emergency Response and Health Systems Preparedness Project. The Project consists of 6 components.

The funds will also be used to support research that are being conducted in collaboration with Indian Council of Medical Research (ICMR). It will also focus on community engagement and risk communication strategies.

The AIIB had also approved 335 million USD to China as a part of its emergency health project.

AIIB

The AIIB had doubled its COVID-19 Crisis Recovery Facility to 10 billion USD. Earlier, the bank had allocated 5 billion USD. It doubled its funds in order to make sure funds are available to all its members in fulfilling economic needs and address public health pressures. It will also help in quick recovery from the crisis.

Emergency Response and Health Systems Preparedness Project

In April 2020, the Indian Government announced that Rs 15,000 crores would be allocated to contain the spread of the virus. The funds were to be utilised under Emergency Response and Health Systems Preparedness Project.

The project is being implemented in three phases. The main objectives of the package include emergency response to limit COVID-19 infection, centralised procurement of medical equipment and drugs, setting up of laboratories, strengthening national and state health systems, surveillance activities. Also, the Pradhan Mantri Garib Kalyan Yojana was launched.