“Recession in India is nothing but a psychological phenomenon.” Give arguments For and Against this view.
The global economic meltdown has begun to show its effects in India also. The growth rate of the economy, which was initially expected to be around 7.5 per cent during 2008-09, is now expected to be much less after being more than 9 per cent during the previous year. But at the same time, various sectors of the economy have been doing very well despite the global slowdown. The capital markets are down and are not expected to do well in the next several months. Rural economy, on the other hand, does not seem to be affected by the slowdown and continues to do well. Many people feel that various economic indicators in the economy do not give ample evidence of the recession in the country.
Arguments For the View
(a) There has been no economic crisis in the country and except for the plummeting of the stock markets most sectors have shown good performance. It would be correct to say that the recession in India is more in the mind.
(b) Over 60 per cent of Indian population lives in the villages and is dependent on agriculture and allied activities. With huge sums of public expenditure being made by the government, the economic activity in the rural areas is robust and there is no sign of slowdown in these areas.
(c) There has hardly been any unemployment in the country due to the domestic economic operations going slow. It is only in the sectors like the BPOs, export- oriented sectors or other outsourced IT services sectors that the global effect of the slowdown has been experienced in India. The very fact that the domestic sectors are doing well implies that the effect of recession is largely in the mind in India.
Arguments Against the View
(a) The very fact that during 2008-09 actual growth rate in the country has come down by more than two percentage points, the recession in India can no longer be termed as psychological and is real and tangible.
(b) Jobs have been lost by lakhs of professionals in the country in the recent months and the government for the first time has been forced to provide the unemployment dole to the professionals who have lost their jobs due to the recession. This is official testimony of the fact the global recession in India has taken its toll.
(c) The government of India has taken several economic policy measures in the recent months to improve the liquidity position in the country. A few economic packages were announced towards the beginning of 2009 and the interest rates were brought down with the aim of increasing money supply in the economic system. There can be no better confirmation from the government about the slowdown than this.