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| A PANDEMIC OUTBREAK AND A MALAISE IN ECONOMY | | |
Rahat Gulfam Mattoo
Covid -19 has taught us new ways of living in all spheres of life,but Economies can also get ill from viruses. While the priority remains health security,a life lost due to covid-19 is no different than the one lost from hunger.Yet,the later seldom makes a National headline.
Economic downturns are cruel. They impose traumatic disruptions in incomes and lives—Salary cuts,extended long leave without pay, outright job loss, drying up of business income or bankruptcy. The already slowing Indian Economy is now faced with covid-19, a global pandemic which is fast turning into an economic pandemic. According to IMF report, India will be the large economy worst hit by covid pandemic. But don’t let anyone tell you that the pandemic is the main reason India’s growth has gone off the cliff.
The economy has already been weakened by years of mismangement before this crisis struck. Figures released by National Statisticians at the end of May explains what went wrong. Even before the Pandemic properly hit India,in the FY ending in March, GDP only grew at 4.2%.
The sequence of quartely GDP growth numbers leading upto that point tells a clear story. 7% growth shrunk to 6.2% then to 5.6%, 5.7%, 4.4% and eventually to 3.1% in the quarter that ended with the lockdown. Reason be the lack of investment, until then India hadn’t seen investment shrink for almost two decades.According to WORLD BANK data (It grew about 10%in 2018-2019) and this shrinkage began well before the pandemic in April 2019. In India virus struck an economy with pre -existing conditions. It’s true that May looks like better month than April, when the lockdown was at its height. But pretty much every indicator of May 2020 is in red when commpared to May 2019. And most analysts believe recovery in any aspect will now take two years or so,rather than a couple of months.
Apart from all this, as India is in deep economic distress---- LOCUST ATTACK ahead of the sowing season is another setback.This locust attack has added to the woes of the pandemic hit economy. All this is the story of LIFE versus GROWTH. Govt. is faced with a choice of extending lockdown at the cost of economic mess.
This spells doom for the urban informal sector, workers and agricultural labourers with job losses, zero savings,and hand to mouth existence, the situation can be life threatening for them. Now Economy needs the lunch to be served, it does not have to b free. The ravaged economy needs a big swift stimulus. Lockdown burden could crush many transporters ,manufacturing construction to be worst hit by labour shortage as economy reopens. Low income labourers form the backbone of the manufacturing sector and they are unlikely to return to cities since there is no guarantee of employment , and their unavailability will be a big missing piece in the puzzle of economic revival. Basically India’s growth story is under siege at the moment. The sustainable developmental goals index released by Niti Aayog and UN reveals some worrisome trends. India is losing its footing in key areas such as poverty alleviation,ending hunger,economic growth and preserving life on Land. Low growth, high prices, rising unemployment ,India needs real reforms now.
SOME STEPS TO REVIVE ECONOMY
India can’t spend its way out of the current mess,made worse by the pandemic. That, however does not mean nothing can be done. There are some things that govt. can still do, just a genuine political intentis needed. There is enormous, perhaps unprecedented economic pain ahead. Both policy and politics will have to play an important role to alleviate this. Bad policy can delay, even derail economic revival and good politics can ensure that the sufferings of the masses is minimized. Policy, especially in times of crisis is also a question of distributing scarce resources among competing needs. In a Democracy, politics influnces this process in a big way. Steps may be
Doles for the poor will certainly help but there is a limit to how much the govt.can afford to spend.
Govt. should focus on helping industries that have strong backward and the multiple forward linkages.
Removing all ristrictions on E-Commerce. It will help keep the growth engine running by supporting all kinds of manufacturers and yet ensure social distancing needed to fight corona.
Better to reverse corporate tax cuts temporarily that havn’t led to any big bang investment. Instead cut personal income tax.
Improvement in purchasing power of the poor is no doubt helpful, but it will mostly support demand for essentials such as food and clothing.That is needed but not enough
Repeated govt.allusions to a $5 trillion economy by 2024, which would necessitate steady real growth of at least 8-9% per year starting now seems increasingly unrealistic.Unemployment,especially amongst youth,seems to be growing, as is the accompanying risk of youth unrest.
CONCLUSIVELY, along with the containment of covid -19,government should equally focus on the indirect crisis put forward by the pandemic. There is an utmost need to visualise the current scenario by the perspective of common man. |
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