NEW DELHI: India’s economy, which is headed for a recession for the first time since 1979, is witnessing patchy revival despite the country relaxing pandemic-related lockdowns. Even as a Covid-19 vaccine may come to the market, delivering it to a population of 1.25 billion in India will take time, a PwC study ‘Full Potential Revival & Growth - Charting India’s medium term journey’, noted, adding the health situation remains dynamic, creating “a direct shock to the economy resulting in a recession.” Across the 730 districts, particularly within the lower income strata, discretionary spending is low at 30 per cent on average, the report said.
Most of the stimulus given by the Centre in the form of free rations and money handouts to farmers have been targeted at this segment. However, in about 100 districts which are largely near metros and urban areas, where discretionary spending is higher at 45 per cent, the covid-19 cases are far more. Some 77 per cent of the total cases are from these areas.
“The worrying spread of the pandemic and re-run of lockdowns is playing havoc with rate of demand revival in the second quarter of the year, though we expect the economy to contract by far less in these months compared to the initial April-June quarter when there was a stricter pan-India lockdown,” said Prof Biswajit Dhar of JNU. The International Monetary Fund has pegged the economy to grow by 4.5 per cent even as many economists believe the contraction could be higher in the range of 5-10 per cent.
According to the report, employment recovery will be a key measure of success in growth. Although unemployment has recovered from the high of 24 per cent, it is still untenable at 11 per cent. Dhar says, “The problem is that with low demand coupled with little fresh investment, most units are not functioning at full strength… which means unemployment is not coming down as fast as we would like it to.”
SLOW GROWTH
Domestic expenditure growth slowed from 8.8 per cent in Q2 FY19 to 6.4 per cent in Q2 FY20, while exports slumped from growth of 15.8 per cent in Q3 FY19 to a contraction of 6.1 per cent in Q3 FY2018. Slowing domestic consumption and exports led to a fall in industrial output and capacity utilisation, PwC said.