Despite the debilitating economic effects of the pandemic, India managed to bounce back and script a story in optimism. When the pandemic was at its worst, foreign investors were putting money into the country at a pace faster than before and the government took timely steps to cushion the pandemic’s health and economic impacts, affirms Prachi Desai.
The discussions and discourses on economy in the year 2020 and the forecasts for 2021 centred mostly on the aftermath of Covid-19 pandemic. The crisis that came as a global shock interrupted both demand and supply chains the world over. The impact was felt throughout the globe primarily due to the inter-connected nature of the present-day world economy.
While, on the one hand, the pandemic constricted supply of labour and impacted productivity in operations, the lockdown led to closure of millions of businesses and deeply disrupted the supply chains. On the other, the infection caused the economy to stall because of job losses, loss of income and a consequent reduction in spending in households and financial investments.
The loss of income caused by the disease itself, morbidities among the working population and the prevalent unemployment was a serious cause of worry. India too felt the tremors of this one-of-its kind torrent. However, despite the forecasts and the fears, the country not only stayed afloat in the economic crisis, it managed to keep masses from going under, simply by focussing on ‘going local’.
Forecast for economy to dip
It was the uncertainty caused by the novel coronavirus that caused fear among nations. Not only was the duration, magnitude and the impact of the virus difficult to analyse, even the prognosis of the disease was changing every day making it very difficult to ascertain the symptoms and the course of treatment for patients. On a larger scale, the uncertainly triggered a vicious cycle that slowed down businesses, reduced consumer confidence and constricted financial flexibility among businesses and individuals. It finally led to unemployment and lack of investments that further impacted the economy adversely. Experts were finding it extremely difficult to account for the linear and non-linear effects of the Covid-19 pandemic.
In June 2020, in the middle of the pandemic, Global Economic Prospects described both the immediate and near-term outlook for the impact of the pandemic. It even laid out the long-term damage the crisis could cause reducing all prospects of growth. The baseline forecast reported a 5.2 percent contraction in global GDP in 2020. This figure was obtained by using market exchange rate weights that indicated the deepest global recession in decades.
The economy was plunging despite humongous efforts by governments to stall and reverse the downfall. In fact, the long-term damages forecasted by the report were expected to wreak havoc by ‘lowered investments, erosion of human capital through lost work and schooling, and fragmentation of global trade and supply linkages.’ Similar forecasts were made for the Indian economy too.
India fought back and how!
The pandemic was expected to plunge most countries into recession in 2020, with per capita income contracting the largest globally since 1870. Developed economies were projected to shrink seven per cent while developing economies were forecast to contract by 2.5 per cent.
The grim picture represented the weakest showing by such economies in at least sixty years. India, however, was writing a different story. When the pandemic was at its worst, foreign investors were putting money into the country at a pace faster than before. According to a report by CARE Ratings, ‘between April and September 2020, when India’s economy was in a “technical recession,” the foreign direct investment into the country rose 15 per cent year-on-year to USD 39.9 billion (Rs 29,400 crore).’
The report further added that ‘Optimism on India growth story among foreign investors combined with ample liquidity in the global market has aided flows into India.’ Not to mention it was the big reforms introduced and pushed by the Indian government such as supporting the manufacturing sector and the economic stimulus packages released by the government that guaranteed the robustness of the Indian economy in this global turmoil.
Government reforms ensured recovery
Prime Minister Narendra Modi’s call for Atmanirbhar Bharat early during the lockdown, followed by Finance Minister Nirmala Sitharaman’s economic stimulus packages with a multi-sector focus on manufacturing, social welfare, stressed sectors, housing, infrastructure, exports and agriculture – ensured that India survives the global economic crisis. Several measures were announced by Minister Nirmala Sitharaman specifically focussing on MSMEs considering the priority to local brands.
The multi-pronged approach by the Indian government witnessed various ministerial heads and departments working in unison to roll out policies and reforms to combat the Covid-19 pandemic and the economic and health consequences of the same. The steps taken by the government ensured actions to cushion the pandemic’s health and economic impacts, protect marginalised and vulnerable groups, and make way for a recovery that lasts long. India realised the best way to do so was to look inwards and ‘go local’.
PM Modi’s call for ‘local’ began with the nation’s Home Ministry itself when Home Minister Amit Shah through twitter confirmed the announcement of the Ministry of Home Affairs ‘to ban all outside products from the canteens of the Central Armed Police Forces (CAPFs) starting from June 1’ that would translate to ‘50 lakh families of about 10 Lakh CAPF personnel will use indigenous products.’
Citizens rose to Atmanirbhar call
The strength of any nation is its people. And, for India, the world’s second largest nation, it’s the 130 crore Indians who supported the nation’s recovery in every possible way. They obeyed the lockdown norms that helped in containing the situation and gave enough time to the state and local government and civic bodies to prepare the health infrastructure and human resources for the long fight ahead.
More importantly, it was the support provided by citizens in protecting and promoting the local market and products that helped the government in implementing its economic policies to slow down the damage done by the pandemic to the Indian economy. Not just that, the shopkeepers and those with enterprises created their own version of wares to cater to the Atmanirbhar Bharat concept thereby creating a sea of local makes.
Indian economy registers positive growth
It is not just public perception that points towards a recovering economy and a mindset that India has fought the crisis well protecting its citizens and the economy. Indian economy is indeed coming out of the de-growth phase.
According to Niti Aayog Vice Chairman Rajiv Kumar the ‘GDP growth will enter the positive territory in the fourth quarter of this fiscal. ‘He said, “The second quarter GDP figure (contraction of 7.5 per cent) reflects that the economy is coming out of this pandemic-induced de-growth phase and my expectation is that in the third quarter, we will achieve the same level of economic activity as the year-ago period.”
He further explained, “And the fourth quarter will show a small but positive growth over the previous year because the government has… ushered in many structural reforms and some more are in the pipeline.”
It was the reforms initiated by the government that focussed on ‘going local’ that provided a strong foundation for accelerating economic growth. Mr Kumar added, “We have now shrugged off the negative impact of the pandemic and are moving towards a sustained high growth trajectory in the coming years.”
Prime Minister Narendra Modi couldn’t have summed it better when he addressed the nation and said, “In times of crisis, this local has fulfilled our demand, this local has saved us. Local is not just the need, it is our responsibility also.”