Mumbai, India: Official data released Monday showed that India’s economy shrank by 7.3 percent in 2020-21, the country’s worst recession since independence, as coronavirus lockdowns displaced millions of people.
After two consecutive quarters of decline, Asia’s third-largest economy increased by 1.6 percent between January and March, the fourth fiscal quarter, after leaving its first “technical recession” since 1947.
According to a study by Bangalore’s Azim Premji University, almost 230 million Indians plunged into poverty as a result of the pandemic last year, with the poor defined as those living on less than 375 rupees ($5) per day.
A loosening of limitations toward the end of 2020 aided tentative recovery inactivity, but this may be short-lived after an increase in Covid-19 cases in April and May.
According to the Centre for Monitoring the Indian Economy, India’s devastating second wave, which has killed 160,000 people in eight weeks, triggered further lockdowns and resulted in 7.3 million people losing their jobs in April alone.
In a country where 90 percent of the workforce is employed in the informal sector, with no social safety net, and millions of people do not qualify for emergency government supplies, this means further suffering.
In response, Prime Minister Narendra Modi’s government has resisted introducing any new substantial stimulus initiatives.
The administration has come under fire for focusing on loans to hard-hit firms rather than direct cash transfers to disadvantaged households, including from Nobel Laureates Esther Duflo and Abhijit Banerjee.
The economic cost of India’s second wave, according to a recent analysis by British financial services firm Barclays, is $74 billion, or 2.4 percent of GDP.
However, because output was so low last year, the headline figures for this fiscal year will appear robust.
The Indian central bank forecasts 10.5 percent annual growth, while the International Monetary Fund predicts 12.5 percent, the fastest among big nations.
“We expect 10 percent GDP growth in FY22, with a slight downside bias,” said Upasna Bhardwaj, Senior Economist at Kotak Mahindra Bank.
But she warned that analysts would “have to revisit this expectation much more often, given it depends on the pace of vaccinations and the pace of restrictions”.
“While the situation this year is not as bad as the national lockdown last year, the economy is coming under a lot of stress due to localized restrictions, which we expect to continue into the rest of the year,” she told AFP.
India has so far reported 28 million coronavirus infections and administered 213 million doses of the Covid-19 vaccine, despite delays and shortages in its enormous vaccination effort.