It’s a full blown coronavirus second wave the country is facing; and its debilitating impact on economic recovery and peoples’ lives is being underestimated. On Wednesday, we added 126,789 cases of Covid-19 infections, with an average caseload of over one lakh for the past one week. India now not only has the dubious record of the highest infections in the world, but we have pulled ahead of our September 16, 2020 peak of 97,894 cases.
The Union Ministry of Finance has, however, taken an optimistic view. The monthly Economic Review for March this year said the economic recovery was resilient as reflected in food grain production touching 303 million tonnes in 2020-21, a record level of production for the fifth year in a row.
Rural employment through MGNREGA has notched up 384 crore person days during FY2021, a rise of 45 per cent compared to the previous year. GST collections have been moving up, outstripping targets. The World Bank too had revised its projections upwards by a massive 4.7 per cent, forecasting that economic growth will touch 10.1 per cent for 2021-22. Earlier, the Bank had predicted GDP growth at 5.4 per cent for the coming fiscal year.
MISTAKEN OPTIMISM?
The Bank’s optimism is based on what it sees as a strong rebound in private consumption and investment growth. But will it now have to revise its figures once again? In fact, Government of India figures hide more than they reveal. For instance, a sudden spike in enrollment under the employment guarantee programme probably implies a breakdown in regular employment, forcing larger numbers to turn to support under MGNREGA.
This seems to be borne out by a mid-March Pew Research Center analysis which found a sharp increase in poverty at the bottom of the pyramid. Says the report: “The number of people who are poor in India (with incomes of $2 or less/day) is estimated to have increased by 75 million because of the Covid-19 recession. This accounts for nearly 60 per cent of the global increase in poverty.” The Pew Research report also found that the middle class in India had shrunk by 32 million in 2020 as a consequence of the downturn, compared with the number it may have reached if the havoc of the pandemic had not been experienced.
RETURN OF LOCKDOWNS
The return of the lockdowns is the new element, not factored in earlier, which is putting the economy in reverse gear. While these are not as severe as the previous March-September 2020 paralysis, every state has been enforcing local lockdowns of varying intensity. Maharashtra, the worst of the states accounting for nearly 50 per cent of the new infections, has imposed a weekend curfew from Friday evening to Monday morning, and a night curfew during weekdays. Gujarat, Madhya Pradesh, and Karnataka too have imposed dusk-to-dawn curfews in urban areas.
Though state governments have been careful not to ban construction and industrial activity, the lack of transportation and the shutdown of markets is again creating a stampede of workers wanting to reach the safety of their villages. Gujarat’s Ahmedabad and Surat, which house a large migrant population, have been emptying out, while in Mumbai the Central Railway is again scheduling ‘migrant specials’ to cater to the rush of those moving to UP and Jharkhand. The new surge in infections is paralyzing hospitality, travel, airlines, and retail markets.
Online travel agencies (OTAs) are reporting a huge slump in bookings, while hotels and restaurants, that were just seeing the first stirrings of business, are shutting down once again. The call for local lockdowns has hit retailers and shopkeepers so badly that, in Maharashtra and elsewhere, trade associations are on the warpath with the hashtag #MissionRoziRoti. Despite optimism that we will see a robust 10-11 per cent growth over the next fiscal, the fact is the second pandemic wave is hitting jobs and fresh consumption.
A recent State Bank Research report says: “Business activity Index based on high frequency indicators has declined in the recent week ending 22 Mar’21 with the latest value at 101.7 (the lowest in a month) from 104.6 in the previous week.” How bad this round of slowdown is will be determined by two crucial factors: how long will it take to control this wave of infections? And, two, how effective will be the government’s vaccination drive? The SBI Research report forecasts that the current pandemic may last till the end of May, and may peak around April 15.
This is at best a guesstimate, and the report admits governments seem to be fighting a losing battle. “Localised lockdowns/restrictions have not resulted in controlling the spread of infection. This is visible in case of many states including Maharashtra and Punjab,” says the report. On the vaccination drive, after a good start, shortages and the Centre playing politics with allotment numbers has again dented the fight. With just 5.8 per cent of the population covered with the first dose, we still have a long way to go.