View: India’s economy is ailing from more than Covid-19
According to the International Monetary Fund, India will be the large economy worst hit by the Covid-19 pandemic. The Fund now says that Indian GDP in the ongoing financial year, which began in March 2020, will contract by 4.5%. Just a few weeks ago, it had been predicting 2% growth for the year.
The IMF’s projection is by and large in line with estimates from investment banks and other international organizations. Indian officials have been reticent about their own estimates. This is not surprising: India’s economy has not contracted since 1979. For the go nment, this is uncharted territory.
A slowdown of this magnitude will have enormous human consequences. By some estimates, the loss of three months’ income would leave nearly half of the country’s population mired in poverty, reversing all the gains made since the economy was liberalized in the early 1990s.
Worse, the go nment’s finances are strained. Tax revenues are set to crash and India’s hitherto relatively stable debt-to-GDP ratio may spike up toward 90%. Controlling the spread of the pandemic will bleed state resources, leaving little for the welfare measures that will be essential in coming months.
Such economic pressures help explain why the go nment lifted India’s stringent lockdown even though the spread of Covid-19 clearly hadn’t been controlled. India now has the world’s fourth-largest number of Covid-19 cases. While the country may be partly protected from a tide of deaths by its favorable age distribution, there is every reason to suppose that more lockdowns to protect its inadequate health infrastructure will be required. If nothing else, this complicates predictions for the medium term and makes the task of reviving the economy that much harder.
But don’t let anyone tell you the pandemic is the main reason India’s growth has gone off a cliff. The economy had already been weakened by years of mismanagement before this crisis struck.
Figures released by national statisticians at the end of May explain what went wrong. Even before the pandemic properly hit India, in the financial year ending in March, GDP only grew at 4.2%. The sequence of quarterly GDP growth numbers leading up to that point tells a clear story: 7% growth shrunk to 6.2%, then to 5.6%, 5.7%, 4.4% and finally 3.1% in the quarter that ended with the lockdown.
What was behind this slowdown? The answer is a lack of investment. Investment shrank by almost 3% over the year. Until then, India hadn’t seen investment shrink for almost two decades, according to World Bank data. (It grew about 10% in 2018-19.) And this shrinkage began well before the pandemic — in April 2019. In India, the virus struck an economy with pre-existing conditions.
This should all be enough to sober any go nment. Yet, policymakers in New Delhi seem to be oddly sanguine. On Tuesday, they posted a cheerful update praising their “prompt policy measures” and touting an “increase in economic activity.” It’s true that May looked like a better month than April, when the lockdown was at its height. But pretty much every indicator for May 2020 is in the red when compared to May 2019. And most analysts believe any recovery will now take two years or so, rather than a couple of months.
Sridhar G Mandyam
Added to these the hurdles in starting business in India even today is making the foreign investors to hesitate to start their business in India
New global reality is world economies will be tanking due to outbreak of Covid19 it the bounce back which matters restricting only to an Indian context will be a fake narrative. Things cannot be looked into isolation it is relative context and bounce back in post covid scenario which matters the most.
I fully agree with the statement. The economy was doing pretty good in 2016-17. Modi must open his eyes.
Nicely analysed the facts
India Economy was down for a long time even before Lockdown
Ashok Kumar Verma
If every indian were to work sincerely and pay taxes honestly, co ption would be viped out and the country would progress in leaps and bounds and the economy would recover really fast.
Pre COVID slowing economy and post COVID stalled economy.Most of them eke out hand to mouth existence
India should adopt a sensible policy in trade and imports, especially in case of China, taking advantages for the nation. It's not the time to search for alternatives. China is creating troubles at borders but try to continue trade where is it is expecting gains. Same should be followed by India too.
It is an incredibly incheritable view somewhat despicable under the current holocaust that has engulfed global economy.
Illiterate Modi-Matric-fail made Indians so POOR in last 6 years by SINKING Indian GDP=0 , 10 Crore Migrant Workers are having only one meal in 3-days.
The author of this article do mot believe in cyclical nature of economy of any country let alone India.
Very much YES. I presume the decline started long back from 2016, when currency demonetisation was carried out with out proper application of mind.
Washikar Rahman Rahman
Yes, with fall in GDP growth rates for 8 consecutive quarters & demand fall, the Economy was going South & Recession had already set in. Covid execarbated the recession deeper & wider
Wrong. India's economy was down in July to Dec last year (H2 2019) but had started bouncing back in Jan - March (Q4, FY 19-20).As a reference, look at the PMI and IIP index numbers in Jan and Feb.
Modi go nment is more of words than action. Every triumph is of their own and failure is linked to previous go nment. People of India shouldn't forget that it was Dr. Manmohan Singh who steered India out of 2008-09 financial crises.
The go nment’s confidence is inexplicable. It has not done enough to reinvigorate the economy.
Given Indian financial status, we cannot afford a.lockdown.
NS % 94
not only India every country