Dr. Santosh Kumar Mohapatra
The Covid-19 pandemic has unleashed a health disaster, precipitous economic downturn, and humanitarian catastrophe in India as well as the world around. India has become the worst-performing of all major economies during the pandemic. Indian economy trumpeted as the world’s fastest-growing has become the fastest-shrinking, with the worst contraction of GDP (-23.9 per cent) among major economies by April-June.
The much-publicised war against the pandemic is lost despite the stringent lockdown as is corroborated by the Oxford stringent index. As of now, India has more than six million infected people with a death toll nearing a lakh. The promise of Prime Minster Narendra Modi to win the war against the pandemic within 21 days of the lockdown, like the way the battle of Mahabharata was won in 18 days, has failed miserably. His offensive against corona proved ineffective just as his demonetisation failed to curb black money. The draconian closure delayed the virus transmission but did not control it. India is now the global leader in the daily rise in virus spread. Unfortunately, the government is expressing elation over the low fatality rate, which is attributed by experts to our hot climate, and to the young population with better immune power, but not to better health facilities. With increase in the number of infected people, fatality rate will decline.
In order to camouflage the failures, the government is dubbing the pandemic as an “Act of God”. Indian economy, which has grown every year for the past 40 years, was faltering even before the lockdown. The economy was on tenterhooks and slowing down due to the draconian act of demonetisation and defective GST.
For eight successive quarters in 2018-19 and 2019-20, GDP growth declined every quarter from a high of 8.2 per cent (January-March 2018) to a low of 3.1 per cent (January-March 2020). In terms of annual growth, the economic growth has declined from 8.2 per cent in 2015-16 to 7.1 per cent in 2016-17; 7 per cent in 2017-18 and 6.1 per cent in 2018-19, finally landing into an 11-year low of 4.2 per cent in 2019-20 against the government’s assumption of 8.5 per cent in the 2019-20 budget.
Unemployment had touched a 45-year high of 6.8 per cent in 2017-18, with household consumption tumbling to four-decade lows. Total employment in India had dwindled by 9 million between 2011-12 and 2017-18, a first in the country’s history; and five million men lost their jobs between 2016 and 2018 due to demonetisation. NPAs of banks grew exponentially. Banking frauds of Rs 100,000 and above have increased manifold in value to Rs 1,13,374 crore in the first six months of 2019-20 from Rs 19,455 crore in 2014-15.
However, the pandemic has exacerbated the already beleaguered economy through supply disruptions, demand compression, and financial repression caused by the countrywide lockdown. India is not only failing to control the disease but also facing mammoth economic losses and colossal human tragedies, destruction of employment and livelihood.
India’s economic recovery prospects have gone from bad to worse .Various rating agencies estimate that growth will contract by five to 14.8 per cent in 2020-21. What is more dangerous is that it is not only that the GDP has contracted but also that the economy is hurtling towards cataclysm.
A decline in growth means a cataclysm of hunger, poverty, unemployment, inequality, multiple diseases and illiteracy threatening our lives. Any little gain made in health, education, innovation and human development will be obliterated. Hard-won human capital gains are at risk. The generation of resources by tax revenues will be hit and debt will escalate. Due to a sudden jump of Rs 7 lakh crore in April-June 2020, the Union Government’s debt has crossed Rs 100 lakh crore.
What is more worrisome is that apart from the recession, India is sliding into a dangerous phase of stagflation — a combination of inflation and low growth — and a decline in job creation. The retail inflation measured by the consumer price index (CPI) remained above the upper band set by the RBI of 6 per cent for nine consecutive months. What is perplexing is that India’s consumer inflation at 6.73 per cent in July is much higher than China’s 2.70 per cent, the US’s 1.0 per cent, South Korea’s 0.3, Mexico’s 3.62 and Indonesia’s 1.32 per cent in July 2020.
As per data from the Centre for Monitoring of Indian Economy (CMIE), due to the lockdown, India’s unemployment rate climbed to a staggering 27.1 per cent in the week ended May 3, from 8.4 per cent in the pre-lockdown week that ended March 22. Around 12.15 crore Indians were out of job in April.
Compared to the 40.4 crore people employed, on average in 2019-20, employment had fallen to 28.2 crore in April 2020 due to the lockdown. However, after unlocking the 40-day lockdown, jobs were created again in the informal and unorganised sector, but formal jobs have not been spurred.
What is worrisome is that according to CMIE’s latest report, salaried jobs have taken the biggest hit in the Covid-19 induced lockdown. Between April and August, about 2.1 crore salaried people in India lost their jobs. Almost six million white-collar workers, including engineers, physicians, teachers, accountants and analysts lost their jobs between May and August.
The pandemic has reshaped India beyond imagination. Krishnamurthy Subramanian, chief economic advisor (CEA), said India’s economy was set for a “V-shaped” recovery and should perform better in the coming quarters. In a V-shaped recession, the economy suffers a sharp but brief period of economic decline, followed by a strong recovery. But India is witnessing a K-shaped recovery, which means there is a growing gap between “winners and losers”, the “rich and poor”. An example is of the stock market being healthy while millions have lost their jobs and are unable to have access to health facilities.
Three premier public health organisations – IPHA, IAPSM, and IAE – had in their highly critical statements pointed out that the historic and systematic neglect of public health as a discipline and non-involvement of public health experts in policy making and strategy formulation have cost the nation enormously in the current pandemic. However, there was no attempt to strengthen health infrastructure and many patients are dying due to refusal of hospitals to admit and provide them with oxygen, ventilators. There is a need to address the health issue first; other things can be taken care of later.
The writer is an Odisha-based economist.