NEW YORK: India’s economy is in “severest recession” since 1996 — the year it began publishing its gross domestic product numbers — while other countries, especially China, are fast recovering from the devastation of the coronavirus pandemic, according to an American media report.
In a dispatch from New Delhi, The New York Times wrote that hundreds of millions of Indian labourers and shopkeepers, who keep the country’s economy running, still can’t find relief, amid predictions that the economic situation would take a turn for the worse.
India’s economy shrank 7.5 percent in the three months that ended in September compared with a year earlier, the newspaper said, citing government figures.
“The new figures firmly ensconced India’s position among the world’s worst-performing major economies, despite expansive government spending designed to rescue the thousands of small businesses severely battered by its long, hastily imposed lockdown,” Times’ correspondent Emily Schmall wrote.
The paper quoted Nikhil Das, a 62-year-old manufacturer of silk ties and scarves in New Delhi, as saying that his business is teetering on the edge of collapse. His sales, which depend on demand from luxury shops and airport retailers, have fallen by four-fifths, it said, adding that he needs payments from customers to make up for his manufacturing costs, but retailers who cant move his wares still owe him more than US $50,000.
Das, according to the report, has idled six workers he once paid for each tie and scarf they made, and he has been treated for stomach pain that his doctor has attributed to stress.
“The money supply chain is broken,” Das was quoted as saying. “It is a constant source of tension to me.”
An estimated 140 million people lost their jobs after India locked down its economy in March to stop the outbreak, while many others saw their salaries drastically reduced, the Mumbai-based Center for Monitoring Indian Economy was cited as saying. As the lockdown was eased, many went back to work, but more than six million people who lost jobs haven’t found new employment.
In a June survey by the All India Manufacturers Organization, about one-third of small and medium-sized enterprises indicated that their businesses were beyond saving.
The industry group said that such a “mass destruction of business” was unprecedented.
Businesses like Das’s form the backbone of India’s still-developing economy, with small and medium-size enterprises employing about four-fifths of the labour force, the report said.
India’s textile factories, leather tanneries, brick kilns, foundries and other small enterprises form “part of the country’s social fabric, bringing local wealth and local employment,” Venkatachalam Anbumozhi, an economist who focuses on South and East Asia, was quoted as saying.
Just a few years ago, the report noted that India, with a population of 1.3 billion people, was one of the world’s fastest-growing large economies, clocking a growth of 8 percent or more. Global businesses began to warm up to the idea of India as a potential substitute to China, both as a place to make goods and to sell them, according to the Times.
But India’s economy was facing headwinds well before the pandemic, it said. Between April and December 2019, G.D.P. grew only 4.6 percent.
“India was expected to really step into China’s shoes and give that additional boost to globalization that was missing,” Priyanka Kishore, head of South Asia at Oxford Economics, was quoted as saying. “And that’s where India didn’t really play out the role it was largely expected to play, and that role seems to be diminishing more and more.”
Since coming to power in 2014, Prime Minister Narendra Modi took some steps to shake up India’s economy, but some of his policies, including demonetization, under which large currency notes were banned overnight in an effort to crack down on tax avoidance and money laundering, “proved disruptive”, the report said.
“Mr. Modi also increasingly turned India’s industrial policy inward, which many economists say has hurt overall growth,” the report said. The slowdown, said Ms. Kishore, ‘almost homegrown.’
The near-total nationwide lockdown in March brought the economy to a halt, instantly stripping many Indians who rely on daily wages of any prospect of earning money, the dispatch pointed out. Millions of workers who over the years had been drawn to India’s urban centers for jobs started returning home to rural areas.
“The economic problems are by no means over,” the report said as it referred to officials desperate to stimulate business lifted some of the lockdown restrictions, allowing more movement — and further spreading the coronavirus. The country is recording a sharp decline in infections from a September high, but experts fear it is only a lull, it said.
Even after the pandemic wanes, Kishore projected that India will be the worst-affected among the world’s major economies: Debt-laden companies will have to borrow even more. Growth could fall to 4.5 percent annually over the next five years, well below the 6.5 percent growth that had been projected before Covid-19.
“The worst,” said Dr. Anbumozhi, the economist, citing the potential impact to small business in particular, “is yet to come for India.”