Region 
 

Region/Mumbai

Clueless with Coronavirus

The Indian economy was on a deterioration path even
before the pandemic. It is now stuck in a demand drought
that is not decreasing any time soon.

By Murtaza Talpur | July 2020

The Coronavirus pandemic is playing havoc with the world economies in a way that has never happened before. Developing countries are most affected and India, one of the biggest markets of about 1.35 billion people, is at the verge of collapse in terms of its pathetic economic situation. There are two problems in India these days that go in parallel - one is the BJP’s incompetent and extremist government and the other is the pandemic. It is a bitter reality but it is true that the Modi-led government is completely clueless on how to manage the economy in the face of a coronavirus-induced recession.

Due to the lockdown, India is facing a problem of falling investment. However, the Indian economy was in one of its worst phases even before the coronavirus outbreak, with growth in the gross domestic product (GDP) dwindling to an 11-year low of 4.2 per cent in 2019-2020. The economy grew by 3.1 per cent in the January-March quarter of 2019-2020, against 5.7 per cent at the same time a year ago, the slowest growth in at least eight years. This vividly depicts the bad governance and management of the BJP-led India.

The Modi government says that the Covid-19 lockdown has impacted data flow and, with constitutional reporting timelines extended, the estimates are likely to undergo revision. The Gross Value Added numbers for the first three quarters have been reviewed meaningfully downwards and show that the economic disorder was deep and widespread even before the novel coronavirus emerged. Four of the eight industry sectors that together comprise the Gross Value Added are now revealed to be in far worse shape than was reported earlier.

This comprises manufacturing that diminished for a third straight quarter and tightened by 1.4 per cent in the fourth quarter; the construction industry that creates a lot of jobs, also continued to weaken and contracted by 2.2 per cent. The revisions in the transport, hotels, trade, communications, financial, real estate and professional services sectors have cut third-quarter growth figures by 1.6 to 4 per cent points.

Currently, the Indian economy is noticeably stuck in a demand drought that is not decreasing any time soon. Private consumption spending that accounts for 55-60 per cent of GDP, extended a down trend as growth slipped to 2.7 per cent. Investment activity diminished for a third consecutive quarter and shrank 6.5 per cent. The current fiscal year data reveals the shocking impact that the lockdown has played on India. Production in the eight core industries that signify 40 per cent of the Index of Industrial Production thinned by a disturbing 38 per cent in April. Apart from that, it is sad to say that merchandise exports shrank by 60 per cent in the same month.

Though disturbing, the readings do not come as a big amazement. The Indian economy had already been on a deterioration path even before the pandemic. This is apparent from the growth figures of latest quarters as depicted earlier. The outbreak of Covid has only made things more serious. When the Indian government imposed a severe nationwide lockdown in the last week of March to contain the spread of the virus, economic activity came to a complete halt. Though relaxations since have led to some resumption, businesses are still operating much below capacity. The full impact of the lockdown on demand and supply has made the deprived people’s lives even more pathetic.

According to a new study at the Universities of Pennsylvania and Chicago and the Mumbai-based Centre for Monitoring, approximately 84 per cent of Indian households are seeing reductions in their incomes since the lockdown began.

The studies further report a sharp and broad negative impact on household income as the pandemic has lessened their staying capacity. Almost a third of all households will not be able to survive beyond a week if they are not provided additional assistance. That punitive statistic finds justification in the unemployment rate, which crossed 27 per cent in early May, up nearly four-fold from levels in January-February. The jobless rate has since dropped to less than 24 per cent.

India’s policymakers and its government should immediately respond to tackle the economic distress. Besides, there should be direct and instant transfers of food and cash to the poor and deprived on very high priority. Such transfers should be broad-based and reach most of the income distribution, as it is clear that about everyone but the wealthiest have seen their incomes fall and are in need of additional resources to survive.

To tackle the economy amid the coronavirus crisis, the BJP government needs to change its extremist policies. Instead of focusing on non-Hindus or minorities, the government should put ita full efforts and focus on how to save India and its deteriorating economy.

Read More