Second wave of COVID-19 is erasing signs of economic recovery in India
India's GDP growth for the financial year 2020-21 was revised to -7.3 percent from -8 percent, as the country registered a 1.6-percent economic growth in the January-March quarter, according to government data released recently.
However, the signs of economic recovery India witnessed during the last quarter of the financial year are being erased by a rampant second wave of the COVID-19 pandemic.
INDUSTRIAL ACTIVITIES SUSPENDED
At present, India continues to record over 100,000 new COVID-19 cases each day. Amid the second wave, many states have announced lockdowns and curfews, with most industrial activities suspended, hence fewer household incomes and a higher unemployment rate.
P. Chidambaram, a Congress opposition leader, noted Tuesday that the per capita GDP had fallen below 100,000 Indian Rupees (1,372 U.S. dollars) over the financial year 2020-2021, down by 8.2 percent year-on-year.
"The deeply worrying conclusion is that most Indians are poorer than they were two years ago," he said.
As hospitals are short of oxygen, many businesses in the country have stopped their regular production and diverted industrial oxygen for medical purposes instead.
"The sharp economic turnaround that India was witnessing earlier this year has been suddenly interrupted due to the devastating second wave of COVID-19. Almost all the lead recovery indicators have been undermined once again over the past few weeks," said Uday Shankar, president of the Federation of Indian Chambers of Commerce and Industry (FICCI).
The FICCI is particularly concerned about the spread of the second wave to the rural areas and smaller towns, he added.
Data by the Center for Monitoring Indian Economy showed that the national unemployment rate reached a 12-month high of 11.9 percent in May.
"With unabated job losses and rural areas ravaged, only an accelerated nationwide vaccine rollout and direct job and income boosting measures can prevent the economy from backsliding again," Indian daily newspaper The Hindu said Wednesday in an editorial.
BUSINESS SENTIMENT DOWN
According to a recent survey conducted by the FICCI, the business sentiment in the country has been "deeply impacted" due to the second wave.
"The overall business confidence index nosedived to 51.5 in the current round after reporting a decadal high value of 74.2 in the previous year's survey," the FICCI said.
The businesses surveyed said their No.1 concern is a weak consumer sentiment, followed by shortages of raw materials and manpower, it said, adding that 70 percent of the respondents considered weak demand conditions as a bothering factor.
As many households have already burnt through their past savings in the first wave of the pandemic, and are suffering from lower income in the second, the weak demand conditions are expected to remain for a longer time, it noted.
In the face of the low business sentiment, the country's corporate sector has suggested the need for another economic stimulus package following one introduced last year designed to revive the economy, the FICCI said.
Direct income support for the rural areas and low-income families in the urban areas, income tax reductions for the middle class, and temporary reductions in indirect taxes must be urgently considered, it said.
There is also a need for continuous liquidity support and credit enhancement for micro, small and medium enterprises, it added.
GOVERNMENTS IN ACTION
Some Indian states have already begun to ease lockdown measures in hope of boosting the local economy.
For example, India's most populous state Uttar Pradesh on Sunday announced an ease of its COVID-19 lockdown measures, including allowing shops to open on weekdays.
However, no relaxation is allowed for cities and districts with more than 600 cases. There are at least 20 such cities or districts in the state.
National capital New Delhi also started its unlocking process on Monday, allowing constructing activities and factories to reopen to help support the lives of daily wage workers, though the local curfew will continue until June 7, restricting the non-essential movement of the public.
Meanwhile, India's federal government is trying to allay the public's fear for a worse economic situation in the future.
"The overall economic impact of the second wave of the pandemic will not be very significant. I expect manufacturing activities to bounce back in the coming months, resulting in higher demand for several services," said the country's chief economic advisor Krishnamurthy Subramanian.
"With infrastructure spending picking up once the lockdown eases, the economy will benefit," Subramanian said, adding that vaccination is important not only for the health of the people, but also for the "health of the economy."
In an interview with Indian daily newspaper the Times of India, Minister of Finance and Corporate Affairs Nirmala Sitharaman said, "there is no need to rush with an immediate stimulus package in response to the second wave of COVID-19."
"The Union Budget (2021) announcements, including on spending, are yet to seep into the economy, as just two months of the current financial year have passed," she said.
India's microeconomic fundamentals are sound, she added.