By Iqbal Abhimanyu
New Delhi, May 17 (efe-epa).- India’s weeks-long Covid-19 lockdown that completed its 54 days on Sunday has floundered Asia’s third-largest economy that is largely based on the informal sector.
Surveys have reported unemployment shooting up to alarming levels amid an unprecedented closure of nearly all businesses and over 80 percent of households reporting a drop in income due to lockdown measures in place since Mar. 25.
The shutdown has also meant a complete ban on transport and non-essential activities to prevent the spread of the new coronavirus.
Authorities have reported some 91,000 cases of Covid-19 and nearly 2,900 deaths in India, with the health infrastructure struggling to contain and deal with the epidemic in the world’s second-most populous country.
India, a $2.9-trillion economy that registered the world’s fastest growth rate between 2014-2018 and had set up an ambitious target of achieving $5 trillion GDP by 2024, now stares at a crisis as manufacturing and retail sectors have slumped and demand has crashed.
In its mid-2020 World Economic Situation and Prospects report released on Wednesday, the United Nations projected India’s GDP growth rate to slow down to 1.2 percent in 2020.
Multiple forecasts have also predicted that India’s GDP would contract during the quarter between April and June.
Last month, the World Bank’s South Asia Economic Focus report said the Indian economy might grow between 1.5-2.8 percent in the fiscal year 2020-21 that started on Apr. 1.
It estimated India’s growth rate in 2019-20 fiscal to be around 4.8-5 percent, pointing to the fact that the economy was already slowing down before the Covid-19 crisis.
As per the data released by the Centre for Monitoring Indian Economy, an economic data consultancy, the national unemployment rate shot up nearly three times in April to 23.5 percent, compared to 8.74 percent in March.
Although economic activity has picked up marginally after the government eased some restrictions in low-risk areas from May 4, millions of small businesses and industries continue to be shut, triggering a massive reverse migration of millions of workers to their hometowns, along with reports of widespread food shortages and job losses across regions.
According to a study based on CMIE data, nearly 84 percent of Indian households reported a drop in income since the lockdown began.
The CMIE survey, which collected data between Apr. 18 and Apr. 30, also said that one-third of the participants said they had resources to survive for just one week before facing acute distress.
“We are not coming out of this soon. The economy will take at least 3-4 years to recover from the recession. Consumption has collapsed and investment has dropped drastically,” Arun Kumar, a noted economist, and professor at the Delhi-based Institute of Social Sciences told EFE.
Kumar said the economic activity had dropped to barely 25 percent of the normal and the demand was set to stay low for a long time.
“Even the most optimistic projections have projected the GDP to recover after a year, but we will need impossible rates of growth to account for the contraction and then regaining the same growth rate within that period,” Kumar said.
Prime Minister Narendra Modi on May 12 announced an economic stimulus package of 20 trillion rupees ($266 billion), a figure that includes a $22.5-billion plan already rolled out in late March for providing direct cash transfers and food security to poor people hit by the nationwide lockdown, apart from liquidity measures by India’s central bank.
As part of fresh measures, the government has announced loans and subsidies worth $40 billion to the small and medium-sized industries, fresh arrangements to provide food to workers migrating back home, and help for street sellers and small farmers through credit lines.
However, experts have warned that the measures were not sufficient, and the crisis could be here to stay as purchasing is limited to essentials and consumer sentiment at its lowest.