China's GDP

How has China recovered?

1. While much of the global economies are impacted by the Covid-19, China’s GDP growth has recovered sharply.

2. This is a result of a bounceback in manufacturing output and a public spending boost.

3. China’s recovery points towards a V-shaped recovery – a sharp fall followed by an equally sharp recovery.

4. It has also effectively avoided a technical recession.

Why is China’s recovery important?

1. The sharp recovery signals a major turnaround in the world’s second largest economy.

2. It also points to facts that

a. The recovery in economic activity is directly linked to a country’s success in controlling the coronavirus spread

b. The quality of policy support matters, even if the scale of spending is modest.

3. According to the IMF, China’s COVID-19 related support policies, amounted to just 2.5% of GDP, as compared to 11% for the US, over 20% for Japan, and 34% for Germany.

4. In China one-half of GDP is driven by consumption.

5. China focussed on maintaining consumption by attempting to put money in the hands of consumers.

6. This was done through pre-paid vouchers for specific products and other related measures.

Which are key takeaways?

1. The sharp recovery in growth points that the size of the fiscal package is not such a big determinant

2. The quality of spending could have a significant positive impact on the economy .

3. The swiftness of a country in bringing the epidemic under control is crucial.

Where does India differ from China?

1. According to various agencies, India’s GDP estimates are projected to contract by 5-6%.

2. Central government’s fiscal relief of under 2% of GDP is regarded megear to mitigate the adverse impact of the economic crisis triggered by the Covid-19 pandemic and subsequent lockdown.

3. In China – the efforts were to put money directly into the hands of the people.

4. But in India, much of the Rs 20 lakh crore Covid-19 economic package has been liquidity driven, with little burden on the Central exchequer.

5. It has been primarily focused on pushing banks to extend credit on the back of government guarantees to sectors like small businesses, non-banking financial companies, microfinance institutions and housing finance companies.