GDP Collapse: Repercussion of India’s War with the Pandemic

A recent report suggests that at least 6.6 million Indians employed in white collar jobs are now unemployed

Once praised by global experts and those at the World Health Organization (WHO) for effective lockdown measures and pro-active leadership at the helm, India’s strategy for defeating COVID-19 seems to have been at the receiving end of a double-edged sword. With over 97,497 deaths overall and roughly 1,200 deaths every day, India is second to only the US in terms of overall deaths, and now ahead of the US in terms of being a global hotspot of daily cases of infection with roughly 86,000 cases per day.

Since the pandemic has now hit India severely, the lockdown has come into question for its style and implementation. At one point, the Prime Minister ordered a national lockdown within four hours prior to midnight and had forgotten apparently that the migrant labourers are stranded on the streets possibly infecting more people as they go back to their native villages – which in itself implies a failure of the lockdown.

For India, such a GDP decline is a massive kickback and a serious issue for India’s own standing in the eyes of its own people and internationally

In fact, a lockdown was designed to contain the spread of the virus for a brief amount of time so that the health professionals are able to access enough medicines, PPEs, ventilators and oxygen to treat the COVID patients. Although this is rather effective on hindsight, the downside is that the Indian economy, which was at a growth rate of 2% last year, would invariably collapse.

Indian Finance Minister Nirmala Sitharaman

Although lockdown has been lifted now, the coronavirus has ruthlessly exploited the population density of India along with the large population, with the cases accelerating exponentially per day (with cases reaching almost 100,000 a day). Thankfully, the death rates are low and getting lower, in proportion to the vast number of cases.

What could be another reason for the lockdown to have failed to decrease the curve? The Indian-American winner of the Nobel Memorial Prize in Economical Sciences, Abhijit Banerjee, mentioned that the lockdown had been too early. The cases had not yet been large enough for a lockdown to be deemed necessary. In fact, what India should have done was to ramp up tracing and testing as done in nations such as Japan, South Korea and China. Even the state of Kerala had appeared successful initially by the system of smart lockdowns and doing a full on trace and test campaign implemented with diligence and care by district officials.

Moreover, the pandemic in India is now in its seventh month since the first phase of lockdown was initiated in March. In fact this has inevitably strained the health ecosystem so harshly that some regions have absolutely no manpower to help treat the rising number of patients showing symptoms of COVID-19. It’s not unusual anymore to read news about people dying on the streets because there are no hospital beds to take them to.

The economy on the other hand, was affected as well

This implies that during the lockdown, there were far less measures being implemented to increase procurement of hospital beds, PPEs, oxygen supply and ventilators, thus further diluting its’ effect. Nevertheless, it’s vital to understand that India’s health infrastructure was already fragile to begin with and combining this with the population and population density of India, “success in lowering infection rates and deaths” would be subject to a debate.

Additionally, the Director of AIIMS Delhi, Dr. Randeep Guleria, speculated that India’s already in the middle of a second wave. However, there is some hope for next year, although it’s not immediate relief. AstraZeneca has tied up with the Serum Institute of India (SII) for producing 1 billion doses out of which 500 million doses are for India. The Russian Health Ministry has suggested that Sputnik-V may be produced by Dr. Reddy’s Laboratories for approximately 300 million doses in India If one more lockdown were to be implemented, the economy would sink further. A third indigenous vaccine, Covaxin, produced by Bharat Biotech underwent successful animal trials on rhesus monkeys and is scheduled to begin Phase III trials from next week in Lucknow, UP on a projected scale of 30,000 volunteers.

The economy on the other hand, was affected as well.  The serious downfall with the lockdown measures is the economic crash by about 23.9% in the first quarter (April to June) and the resulting employment crisis that has left over 23% without jobs. Although since lockdown was lifted and the economy was slightly better off than what it was in the first quarter, the GDP growth each quarter is going to be weaker still. The government’s $260 billion relief package has not reached the beneficiaries as Prime Minister Narendra Modi had said in his Mann Ki Baat speech a few months ago.

A recent report suggests that at least 6.6 million Indians employed in white collar jobs are now unemployed. They have taken a massive hit as well. Investment into India has been considerably low — with $20 billion being the figure put out by the Ministry of Finance.  The response of the Ministry of Finance has been rather mute and in fact outright evasive over issues — such as migrant labour deaths, which had gripped the nation’s attention during the early months of the lockdown. For instance, the central government said at the new Lok Sabha session that they didn’t have a record of migrant labour deaths, in essence suggesting that they were not concerned enough about the humanitarian crisis at large. 

This is not to say that India has failed significantly because the virus had been after all an “Act of God”, with the phrase being a poignant reminder from the Finance Minister Nirmala Sitharaman. Major world economies such as the US, with 9.1% decline or the UK with 20% decline are less affected in comparison to India where a large number of people are making less wages than much of anywhere in the world and has high income inequality.

India’s nevertheless supposed to have a grim, but much better figure than -23.9% decline for the second quarter. According to the eminent economist Pronob Sen, the GDP will decline by between 13-14% in the 2020-21 financial year.

For India, such a GDP decline is a massive kickback and a serious issue for India’s own standing in the eyes of its own people and internationally. India’s achievements in the past decades included getting at least 300 million people out of poverty, but this economic catastrophe induced by a pandemic will undo whatever progress was achieved in previous years.

For India, this pandemic has been a tragedy and a catastrophe

However, as the saying goes, if we are knocked back to square one, the only way to go about is forward. Hence, the positive here is that India can serve as an open market for companies to fill up and help boost employment opportunities. Moreover, several economic reforms such as the most recent Farm Bills, that were passed by the legislation controversially, has the potential to shake up the agricultural sector from centuries of medieval practices and systemic exploitation — although farmers are staging protests across the country during this pandemic, arguing that these three bills passed were against their interest. It’s primarily fuelled by a fear that the government’s planning to rob them off the Minimum Support Price (MSP) that had assured the farmer of protection from losing out on minimum income.

To a point, the Finance Minister’s recent comments on the crisis as an “Act of God” which is rather remarkable since the pandemic sure was God’s play, but the decision for the nationwide lockdown and the subsequent economic fallout was clearly the act of humans. For India, this pandemic has been a tragedy and a catastrophe. However, there is hope and light since India is a relatively young population and that explains why there is a large recovery rate and a lower death rate. However, COVID-19 is possibly humanity’s awakening to the critical flaws that exist in our economic structure and even health response and infrastructure.

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