The coronavirus pandemic has affected all nations and brought the global economy to a halt. Developed and developing countries alike were forced to shut down economic activities and impose various kinds of lockdowns. Trade and the stock market were affected too – according to the World Trade Organization, the world merchandise trade can witness a drop between 13 per cent and 32 per cent in 2020 due to the pandemic. The impact on the Indian economy has also been significant. Supply chains broke down due to the pandemic, unemployment rose and debates about healthcare vs economic recovery have dominated discussions. All of this was primarily driven by the various stages of lockdowns that the Indian government imposed on its population of 1.3 billion. However, with the lockdowns ending and the economy recovering, it is very crucial to discuss the issues caused by restrictions in order to get the economy back up and running to its pre-COVID 19 levels.
Statistics and Figures
It is estimated that there was a steep decline of 23.9 per cent in the Gross Domestic Product (GDP) in the months of April to June 2020, which coincides with the impositions of lockdowns. This figure also becomes significantly grimmer when we compare it to last year’s GDP growth of 5.2 per cent in the same quarter. Similarly, there were other sectors which saw a decline in the Gross Value Added (GVA) of April to June 2020 compared to growth in April to June 2019. Electricity, gas, water supply and other utility services shrank by 7 per cent, whereas they had seen an 8.8 per cent growth a year ago. There was a decline of 10.3 per cent in public administration, defence and other services. These services had seen a growth of 7.7 per cent last year.
But perhaps one of the most shocking figures comes from one of the worst-hit industries – trade, hotel, transport, communication and services related to broadcasting. They witnessed a decline of 47 per cent in the first quarter, compared to an earlier growth of 3.5 per cent. The only positive growth was witnessed in agriculture, wherein the GVA grew at a 3.4 per cent rate compared to last year’s 3 per cent in the same quarter.
What do these numbers mean?
These numbers tell us that the lockdown brought with it impacts that were not just short term. Driving down GDP to such an extent means that it will take more time to bring it back up. There have been several such long-term impacts – the lockdown caused disruptions in critical supply chains. With limited incomes, the demand for consumer goods fell. The savings of businesspeople sitting at home continued to dwindle. There was widespread unemployment. While people were stranded due to hastily imposed lockdowns, they continued to barely survive and use their earnings on basic necessities. The impact of the lockdown was a significant dent in the growth of the Indian economy.
But in this era of international trade and globalisation, the impact in India cannot be featured in an isolated discussion. The impact on the world economy also negatively impacted the Indian economy. Arun Singh, who is the chief economist at Dun and Bradstreet India said, “A fall in the optimism levels amid heightened uncertainty has led to a ‘double whammy’ – closure of businesses leading to global supply chain disruptions and a steep fall in the consumption.” Until the rest of India’s trading partners and the world economy as a whole doesn’t find its footing, a complete recovery can prove to be difficult.
Why has there been such a huge impact in India?
While all countries witnessed some sort of economic decline, some countries were comparatively quicker to get back up on their feet. For example, the Chinese economy saw a growth of 3.2 per cent in the months of April to June 2020. This was preceded by a decline of 6.8 per cent in January to March 2020. However, India hasn’t been as lucky in its economic recovery. There are several reasons for this, the first being the length and intensity of lockdowns. India had a countrywide lockdown for several weeks and in some regions of the country, it went on for several months. But more importantly, economic recovery goes hand in hand with the number of cases a country has. The sooner a country can drive down the number of infections, the earlier they can go back to reopening their economies. Lesser infections will inevitably mean less spending on healthcare and fewer people out of the workforce. Reopening the economy will not have as much of a positive impact if workers are isolating at home due to sickness.
The “New Normal” and the Future of the Economy
It is a given that in order to get the economy back, the debate between healthcare and economic recovery needs to be interpreted in a much more multi-nuanced way. Both of these aspects need to go hand in hand. To reap economic benefits, the health of the citizens needs to be taken into account. Efforts in these sectors are being made and these efforts are also proving to be fruitful.
The “New Normal” of the Indian economy will perhaps ironically be the most abnormal of situations our economy has been in – one that is ruled by the stock market and rates like always but also greatly influenced by a disease and the healthcare systems of the country. The new normal will be painted by uncertainty and more fluctuations than usual. Moreover, national recovery will have to be followed by a global recovery as well.
The recovery in India has recently started to look up with reports of economic activity slated to see positive growth of 0.5 per cent in January to March 2021. However, this is dependent on the absence of a second wave in the near future. This further goes to prove the importance of keeping health in mind while pursuing economic recovery. Like almost everything that is related to the pandemic, economic recovery’s solution also includes keeping public health guidelines in place. From encouraging workers to wear masks to making people work from home, the pandemic has completed transformed the scene of economic activity in India and all over the globe and not just ushered in a new normal of the Indian Economy but for every aspect of our life.