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UPSC Mains Previous Year Questions: India V-shaped economy | Indian Economy for UPSC CSE PDF Download

Do you agree that the Indian economy has recently experienced V- shaped recovery? Give reasons in support of your answer. (UPSC GS3 2021)

V-shaped recovery is characterised by a quick and sustained recovery in measures of economic performance after a sharp economic decline. It is very apt to state that the Indian economy has recently experienced V-shaped recovery.
Supportive Arguments

  • Quarterly GDP Growth: The COVID-19 pandemic has been a human and economic catastrophe for India. Almost one-fourth of the country's economic activity was wiped out due to fall in domestic demand in wake of the strict nationwide lockdowns. India's GDP dipped a historic 23.9% in the first quarter (Q1) of 2020. The contraction narrowed down to 7.5% in the second quarter (Q2).
  • Rise in Government Expenditure: Total expenditure of the government rose 48.3% on year-onyear basis in the month of November. On the other hand, capital expenditure shrugged off a three-month contraction and expanded 248.5%. This was mainly due to the introduction of the Atmanirbhar Bharat package.
  • Revival of Imports/Exports: After dipping for 9 consecutive months, merchandise imports finally experienced a growth of 7.6% (y-o-y) in December 2020. The revival was led by gold, electronic goods and vegetable oils. India’s merchandise exports have reached pre-Covid-19 levels and exhibited a growth of 0.1% in December 2020.
  • Financial Markets Surge: The COVID-19 pandemic kept the Sensex to a record low in late March 2020. However, it staged a strong recovery from the lows. Both the BSE and NSE indices finally wrapped up 2020 on a bullish note.
  • IPO Market: During December 2020, the listings of two Initial Public Offerings (IPOs), aggregating Rs. 1,351 crore, took the total resource mobilisation through main board IPOs to Rs. 15,971 crore during 2020-21 (up to December 2020), marking a sharp rebound from Rs. 10,487 crore in the corresponding period of the previous year.
  • Industrial Activity: Although industrial output remains volatile, contracting by 1.9% in November 2020 after a record expansion in October by 4.2%, industrial activity is finally turning around. The headline Purchasing Managers’ Index (PMI) manufacturing expanded in December 2020 to 56.4, a tick higher than November’s reading of 56.3.
  • Record GST Collections: The gross Goods and Services Tax collections touched a record high of over Rs. 1.15 lakh crore in December - the highest since the implementation of the regime. The collection indicates that the economy continues to show signs of recovery after a stringent lockdown.

Topics Covered - Reasons for V-Shaped economy

The document UPSC Mains Previous Year Questions: India V-shaped economy | Indian Economy for UPSC CSE is a part of the UPSC Course Indian Economy for UPSC CSE.
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FAQs on UPSC Mains Previous Year Questions: India V-shaped economy - Indian Economy for UPSC CSE

1. What is a V-shaped economy?
Ans. A V-shaped economy refers to a rapid recovery in the economic growth rate after a significant decline. It is characterized by a sharp decline followed by a quick rebound, forming a "V" shape on a graph depicting economic performance.
2. How is India's economy performing in terms of a V-shaped recovery?
Ans. India's economy is currently experiencing a V-shaped recovery. After a steep decline in economic growth due to the COVID-19 pandemic, the country has witnessed a rapid rebound in various sectors. The government's stimulus measures, economic reforms, and revival in consumer demand have contributed to this V-shaped recovery.
3. What factors have contributed to India's V-shaped economic recovery?
Ans. Several factors have contributed to India's V-shaped economic recovery. These include the government's fiscal stimulus packages, monetary policy measures by the central bank, reforms in labor laws, infrastructure development initiatives, and increased consumption due to pent-up demand. Additionally, the resilience and adaptability of Indian businesses and industries have played a crucial role in the recovery.
4. Are there any challenges or risks that may impact India's V-shaped economic recovery?
Ans. Yes, there are certain challenges and risks that may impact India's V-shaped economic recovery. The ongoing COVID-19 pandemic remains a significant risk, as a resurgence in cases or new variants of the virus can lead to disruptions in economic activities. Additionally, global factors such as trade tensions, geopolitical uncertainties, and fluctuations in oil prices can also pose challenges to India's economic recovery.
5. How does a V-shaped economy impact job creation and employment opportunities?
Ans. A V-shaped economy typically results in a rapid recovery of businesses and industries, leading to increased job creation and employment opportunities. As the economy rebounds, companies resume operations, expand production, and hire more workers to meet the growing demand. This, in turn, helps in reducing unemployment rates and improving the overall job market scenario.
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