Before hitting Kovid, many analysts had questions not only about the reliability of India’s gross domestic product (GDP) growth figures, but also about the motive behind them. When the same statistical agency announced a 25% contraction in the first quarter of 2020-21, the agency passed their credibility test, which explains India’s poor performance. Similarly, when the country’s infection rate dropped significantly last year, there were dark clashes of data repression. Now that India’s daily infection numbers have crossed 100,000, these numbers are no longer reliable.
These commentators should remember what Ronald Reagan said to Jimmy Carter. No one likes to be told over and over again what is wrong with their country and its people, especially the most untrue. No one wants to hear about things that hurt us. They want to be inspired and the sunlight leads to the upper areas. They want their leaders to trust the country as much as possible (‘Why Cair Starmer Is Doomed’, unheard.com, April 2021).
On a more global scale, epidemiologist Ishwar Gilada recently told Govinds Itiraj of IndiaSpend.com, “India is the largest country in the world with 140 crore people, in terms of two or three countries. Health and many other issues. So rather than ranking based on numbers, it should be ranked based on cases per million and deaths per million. Of the 210 countries, India ranks 120th out of a million deaths and 125th out of a million cases. The moment you start keeping it that way, then India’s economic impact and projection [in a very bad state] Stops automatically. “(‘We’re fine to deal with Kovid’s second wave’, 9 April 2021) He was right about all of these comments except the last sentence. Critics did not see their prediction that the Indian economy would sink. Laughing their chops again.
In the same conversation, economist Dharmakriti Joshi pointed out that the economic impact may be less than the first time, and he cites the strongest example of productive activity in the US and Europe despite the second wave. He was right. We need to learn a year behind us. That is why deaths are not the same as last year and there is no shortage of hospital-beds everywhere in India. Localized lockdowns can hurt, but the economy may not shave more than a few basis points from the growth rate. When it presented its budget for 2021-22, government estimates on economic growth and tax ease were far more traditional than those of the private sector. This means that there is a possibility of some stimulus without harming those numbers. Note that the vaccine is progressing rapidly. Therefore, there is a good case for this wave of economic impact to be limited to the first quarter of the 2021-22 financial year.
There are two exceptions. Negative risk is not insignificant and trade disruptions have an unequal impact on different segments of the Indian population. The personal income and wealth of the ‘zoomer’ class in the country is not affected by lockdowns and other movement restrictions. However, consulting services and manufacturing and construction are also affected. Outside the agricultural sector, there are more employees in construction. As John Cochran of the Hoover Institution points out in the podcast, this vaccine is a ‘leave home and go to work’ pass. Therefore, those who have to leave for work should be vaccinated first. In India, this means giving preference to vaccine shots for construction workers, most of whom are migrant workers, manufacturing workers and those in contact services such as tourism, hotels, restaurants and home delivery. Capacity consumption in the manufacturing sector fell by 7.5 percentage points between March and December 2020, according to a survey by the Reserve Bank of India. Every effort made to push it back will be worth it.
In the long run, the government is dedicating resources for the creation of government infrastructure. This allowed a much lower tax rate for new production units set up before 2023. However, since we will lose 12-18 months to the epidemic, there is a case to extend until the end of March 2025. The resumption of the Micro, Small and Medium Enterprises (MSME) classification made last year did not help. To promote growth, firms should be allowed to remain in the same category until both sales turnover and investment standards are exceeded. Furthermore, if both manufacturing and service companies are thinking more about replacing workers with contact-less automation, that is not good news. Therefore, we need to think about whether anything else can be done to promote recruitment and discourage automation. Finally, long-term damage is inevitable if educational institutions are closed or unable to provide education.
My suspicion is that there is a silver bullet in anything. But the combination of most bullets should limit the damage and, with some luck, put us on a high-growth path.
These are the personal views of the author.
V. Anantha Nageshwaran is a member of the Prime Minister’s Economic Advisory Council.