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Sunday, April 11, 2021

Is the Indian economy recovering? Here’s what the debate says

Apart from causing a deal of great damage to global public health, another sector that this Covid-19 pandemic has severely affected is economy. Crisil stated that India’s worst to date is now. As per its prediction, the economy will shrink by 5% in the current fiscal, courtesy Covid-19 lockdown. We don’t have to be great economists or finance experts to understand the pandemic’s negative impact on the economy. Millions of incidents of layoffs, pay cuts, and company budget slash among others denote that.

Here’s an analysis of India’s economy in 6 points

1. The Crisil analysis

“The first quarter (April to June 2020) will suffer a staggering 25 percent contraction. About 10 percent of gross domestic product (GDP) in real terms could be permanently lost. So going back to the growth rates seen before the pandemic is unlikely in the next three fiscals,” Crisil said while analyzing India’s GDP.

It is not that India is witnessing a recession for the first time in the country’s history. According to a report, in the past 69 years, the recession hit India thrice, in 1958, 1966 and 1980 fiscals and the dearth of sufficient rain or a bad monsoon was the sole reason behind this.

If you read the Crisil analysis, you shall see that this time, it has happened very differently. Since the pandemic has crippled mostly the urban setups of any country, rural areas remain mostly unaffected. This is true for India as well and our rural sector, i.e. or agriculture can soften the blow of the recession in the current fiscal of 2020-2021.

India's economy
Photo: Twitter

2. How it all began with lockdown

India’s Covid-19 lockdown, one of the lengthiest in the world, was imposed on March 25 and extended thrice till May 31. No doubt this affected economic activities severely. Therefore, the first quarter of this fiscal is the worst affected. The first quarter saw a complete washout of the non-agricultural economy. Sectors like education, travel and tourism, real estate, and hospitality were among the worst affected. These fields may continue to see a big hit in the quarters to come, warned Crisil in its report. The first quarter also saw the loss of thousands of jobs and incomes as many sectors started shedding extra “burden” to survive in the race.

3. The extent of economic losses

As per a report, the first round of survey by the Azim Premji University from April 13-May 20 shows the job loss caused by the lockdown was 66% and the income loss was at 64%. “The percentage of job loss works out to be 276.2 million in number, assuming the total workforce at 465.1 million in 2017-18,” the report said. The survey results show that 47% of Indian households didn’t have enough money to even purchase a week’s essential items. This was just a tiny example of the economic losses that were manifold.

4. The Centre’s Covid-19 relief package

The Centre announced Rs 20.9 lakh crore economic relief package to revive the economy. It unveiled stimulus in five daily doses meant for various sectors. The package aimed at creating a self-reliant or Atma Nirbhar India. But as we all know, the package must fulfill certain basic objectives, before self-reliance, for long term growth to take place. And bringing the pandemic under control is the first and foremost condition here.

But this article is not about promoting the ideas of Modi’s naysayers, neither it’s about bolstering the bhakts’ claims about the ruling party’s “efficient” way of handling the situation.

India’s main opposition, the Congress, has slammed the Centre for the drooping economic condition. Therefore, here’s some positive developments that happened lately.

5. Sign of green shoots

As per several reports, India’s economy is showing early signs of recovery four months after a strict lockdown was imposed to contain the pandemic’s outbreak. One of these reports claims that some important indicators of the economy such as exports, foreign investments, and employment numbers suggest that India is slowly improving.

A) Rise in exports is a good sign

As reports suggest, the exports of certain commodities have gone up. For example, spice exports registered a rise of 34% in June. The automobile sector has also witnessed growth in exports. Total exports across categories increased 2.95 percent to more than 4.76 million vehicles in the fiscal ended March 31. Commerce and industry minister Piyush Goyal recently told reporters: “Exports have shown a good turnaround. We are in July at about 91 percent export level of the corresponding period last year. While imports in July are 70 percent of last year’s level.”

B) Foreign investment has started again

Another sign of recovery is the resumption of Indian businesses abroad. Indians are the second-highest investor in the UK. The latest data from the Department of International Trade reveal that Indian trades are the second-largest investors in the UK. This year is a year of technology and telecom companies as we see them continue to dominate the industry. We have seen Google’s announcement of investing Rs 75,000 crore in India to develop the digital economy and we have followed Jio-Google’s upcoming tie-up development. All of these speak of job creation, revenue generation, and growth of the money market.

Julie Chappell, managing director of International Markets at London & Partners, told India Today TV: “We did see a dip in economic activity at the start of the pandemic, but that was because of the turmoil the global economy was in. Since the past few months, investments have been increasing by Indian companies. Companies have been opening offices and we expect investment to increase by this year-end.”

C)Slow but gradual decrease in unemployment

Reports of Centre for Monitoring India Economy show unemployment has gone down June and July, another indication of India making a recovery. As per the CMIE data, an estimated 121.5 million jobs were lost in April 2020. It recovered to around 100.3 million in May and fell to 29.9 million in the month of June. It registered further recovery and the number of jobs lost decreased to 11 million. Though major recoveries are taking place in the informal or unorganized sector, still it is no doubt a good sign.

6. The road to recovery

Though we are having the early signs of economic recovery, it will still take quite a long time for India’s economy to be back on track, former RBI chairman Raghuram Rajan said in a report.

Rajan gave a number of advices to the Centre, banks, and RBI as well. Talking about several issues about the current situation in the world and India alike, Rajan told CNBC TV18 why macros and markets are contradicting. He said the bouts of anxiety over the pandemic can bring markets down and India cannot afford to bail out all companies like the USA.

It is obvious that full recovery won’t take place until the social and economic activities start picking up. Several states still continue to be under lockdowns. Major cities like Pune, Bangalore, Chennai, Guwahati, Hyderabad, etc. are shut barring few relaxations. New infections are growing dramatically, crossing 65,000 a day on Wednesday. with nearly 24 lakh total cases. Though the death rate and the recovery rate are rising, new cases affect the natural way of life and livelihood for people. The picture is still quite uncertain and grim for the economy. However, Indians are pinning their hopes on the slightest signs of improvement.


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