Our economy contracted by a massive 23 per cent. Things might be looking better but there could be long-term damage
Patients who have ostensibly recovered from a bout of Covid-19 are reporting strange traits. CNN’s flamboyant business correspondent Richard Quest, who fought off the disease during its initial days, recently said that he has not felt quite the same. The virus might have made him more clumsy. Others tormented by the disease are reporting reduced lung function, some have been left diabetic and yet others afflicted with brain damage. But what about the patient called the Indian economy? Although mortality rates, we are told, are under check, it seems those hit by the economy going into a tailspin will soon outnumber those directly impacted by the disease. With demand taking a tumble, economic activity in the first quarter of the current fiscal dropped a scarcely believable 23 per cent.
Were matters made worse by the seeming ineptitude of the doctors treating the economy? To be fair, no doctor, medical or economic, has really managed to conquer the disease and its effects, but some have dealt with it better than others. Could those overseeing the Indian economy have done a better job? Much has been written about this and many constructive as well as several idiotic suggestions have been made. However, it is no secret that our economy was already close to stalling before the virus from Wuhan spread across the world. While Narendra Modi’s appeal remains strong with the masses, there is a growing degree of frustration among many about the handling of the economy by him and his team of ministers, bureaucrats and even bankers. Make no mistake, the Reserve Bank of India, by holding onto its cash reserves, even though what the economy is going through is the archetypal definition of a ‘rainy day’, has not helped the situation.
Yes, there has been an uptick in demand in July and August and some believe that by the end of September we will get a clearer idea of the situation for better or for worse. Wholesale dispatches by the larger automobile manufacturers have picked up of late. While the retail offtake has remained steady, the expectation is the festive season will see a pick-up in consumer demand powered by the rural economy. But even then, the damage might be long-lasting. Millions of white collar and blue collar workers from the formal economy have lost their jobs and many of those will not return, as some sectors such as aviation and hospitality are almost certain to require years to recover to 2019 levels. Others like the media might never be the same again. That said, there is opportunity in adversity. After all, a bounce-back in 2021 even to 2019 levels will mean that the 23 per cent decline might become a 30 per cent climb next year. It is darkest before the storm ends.
Courtesy: Editorial: The Pioneer