Bad news dominates
It was exactly ten months back when Covid-19 made its presence felt in India. Since then no good news has made it on the news desks which would have brought some cheers to the people as well. Now the latest in the series of bad news has come from the World Bank.
The World Bank has pointed a grim picture of the economy in India predicting a further contraction in India’s GDP by 9.6 per cent this fiscal. This is reflective of the national lockdown and the income shock experienced by households and firms due to the COVID-19 pandemic.
The Washington-based global lender did not stop here. It also noted that the India’s economic situation is much worse than ever seen before. In its report on South Asia Economic Focus ahead of the annual meeting of the World bank and International Monetary Fund, the WB forecasts a sharper than expected economic slump across the region, with regional growth expected to contract by 7.7 per cent in 2020, after topping six per cent annually in the past five years.
Factoring in population growth, however, income-per-capita in the region will remain 6 per cent below 2019 estimates, indicating that the expected rebound will not offset the lasting economic damage caused by the pandemic.
Ironically, India has already recorded a 25 per cent decline in GDP in the second quarter of the year, which is the first quarter of the current fiscal year in India. The slump came after the spread of the coronavirus and containment measures severely disrupted supply and demand conditions across India.
The situation turned exceptional as the crisis deepened with workforce leaving their jobs and migrating back to their places of origin. This situation led to crisis as no manufacturing took place as factories were shut for almost a period of four months. Though some activity has been reported in some sectors but the output and the demand has been at the lowest ebb, making the recovery process a cumbersome task.
Interestingly, a monetary policy has been deployed aggressively and fiscal resources have been channeled to public health and social protection, but additional counter-cyclical measures will be needed, within a revised medium-term fiscal framework.
However, with every big crisis one has to realise that any revival will not be witnessed anytime soon. And it will actually change the longer-term future also. The government will have to think an out of box especially the policies related to the informal sector.
There’s a big problem that the informal sector has no coverage in social insurance. What we see now is that especially the informal workers in the middle of the income distribution have lost their jobs. There are no systems in place to support those people.
This is a serious issue which needs immediate attention. The revival can be slow but it needs to be accelerated.