What Will Happen to the Indian Economy: Now and Ahead...

 

Cosmo: Experts are saying this could be the worst economic crisis since the Great Depression in the 1930s. It is also being compared to 2008’s financial crisis...

 

Reetika Khera: “Both those events had led to a loss of livelihoods. So yes, in that sense, this crisis is similar. Another similarity is that the ‘shock’ is felt across the world, at the same time. It is not a localised crisis.

In India, however, our situation is similar to the previous two global crisis in another way: it is a crisis perpetuated by the irresponsible behaviour of the well-off, for which the poorest pay a disproportionate price. Because the virus was essentially brought into the country by those travelling in from abroad, who did not follow instructions to self-quarantine. Such callousness resulted in the spread of the virus, and eventually a lockdown that has snatched the livelihoods of millions of daily wagers, for no fault of their own.”

C: How will things stand for the global economy after the pandemic passes?

RK: “It is hard to say, but I hope that countries like India will realise that their spending priorities have been skewed in the wrong direction—we have been building flyovers and highways, manufacturing military equipment, calling it ‘defence’, while weakening our defenses against real health related threats. Do you know that each year, an estimated four lakh people die from TB in our country?!” 

C: How will COVID-19 impact our economy? 

RK: “In India, there are three crises we deal with. One is the health crisis. Here, we might be at par with the world, because everyone is dealing with a novel situation. And, thankfully, we have not seen the sort of exponential growth that many others have (that might simply be because we are testing fewer people). We might be protected to some extent based on the *very* tentative findings that the virus may not survive heat/dryness. Let me emphasise: these findings are tentative; I mention because in such dark times, everyone wants hope to hang on to.

Secondly, like others’, our economic fall-out is linked to the lockdown. Here, we are at a disadvantage, because we have a large population that mainly lives a frugal and fragile life. Visualise those migrants leaving cities on foot, with all their belongings. They were carrying less on themselves than some of us might for a day trip.

Third is the humanitarian crisis, which is entirely of our own making! Because we rushed into a lockdown—one of the most stringent ones in the world—without any prior planning, especially for the weakest in our society.”

C: Will we also see a recession and spike in unemployment?

RK: “Measuring employment in India is not straightforward because only 17% of the population is in regular salaried jobs. Most others have multiple sources of livelihood—like some casual work in the city combined with a farming activity in the village. 

According to the CMIE surveys, there has already been a sharp increase in unemployment. If there is a recession, more job losses will follow. But the government can take proactive measures to ease the blow of a recession.”

(Illustration by Muhammed Sajid)

C: Which sectors will be hit the worst? 

RK: “Casual labourers have been badly affected. And that comprises about one-third of our workforce today. Many of these are people who earn on a daily basis, so not having work for three to five weeks in a row has been devastating for them.

The crisis has taken a massive toll on the gig economy workers, too. Think of Ola/Uber taxi drivers, delivery boys for groceries and supplies...”

The economic fallout worldwide is essentially linked to the lockdown

C: So what does the future hold for us?

RK: “In many European countries, the Second World War was a moment of reckoning. When the bombs fell, they did not discriminate between rich and poor. Just like coronavirus. This realisation led those countries to put in place what we call a ‘welfare state’ today—healthcare, education, social security, child benefits, legal aid, and more.

The only reason to keep such a large section of the workforce in the informal sector is to be able to exploit their labour. We need to stop thinking of labour as a cheap resource, and start thinking of them as human beings, like you and me.”

 

Reetika Khera (Economist and Associate Professor, Economics, IIT Delhi)