NEW DELHI – Coronavirus continues to weigh on India’s battered economy, putting growing pressure on Prime Minister Narendra Modi to encourage an emerging recovery and get the country back to work.
The coronavirus, which struck in two waves, has killed hundreds of thousands of people and brought cities to a standstill at times. Infections and deaths have decreased and the country is back to work. On paper, economists predict that growth could skyrocket in the second half of the year.
However, it can take years for the damage to be repaired. According to India Ratings, a rating agency, economic performance from April to June this year was 9.2 percent lower than in the same period in 2019.
The coronavirus has essentially robbed India of the momentum it needed to create jobs for its young and rapidly growing workforce. It has also exacerbated longer-term problems that are already holding back growth, such as high debt, lack of competitiveness with other countries, and political missteps.
Economists are particularly concerned about the slow vaccination rate and the possibility of a third wave of the coronavirus that could prove disastrous for any economic recovery.
“Vaccination progress is slow,” said Priyanka Kishore, director of India and Southeast Asia at Oxford Economics, in a research briefing last week that only 11 percent of the population are fully vaccinated. The company reduced its growth rate for 2021 from 9.1 percent to 8.8 percent.
Even 8.8 percent growth would be a strong number in better times. Compared to the previous year, India’s economy grew by 20.1 percent from April to June, according to estimates by the Department of Statistics and Program Implementation on Tuesday evening.
But these comparisons benefit from comparing it to India’s dismal performance last year. The economy contracted 7.3 percent last year when the government shut down the economy to stop a first wave of the coronavirus. That led to huge job losses, which are among the biggest hurdles to growth today, experts say.
Real household incomes have continued to fall this year, said Mahesh Vyas, executive director of the Center for Monitoring the Indian Economy. “Until that is fixed,” he said, “the Indian economy cannot recover.”
At least 3.2 million Indians lost stable, well-paid jobs in July alone, Mr. Vyas estimated. Small traders and day laborers suffered greater job losses than others during the lockdowns despite being able to return to work after the restrictions were lifted, Mr Vyas said in a report earlier this month.
Updated
Aug. 31, 2021, 7:36 p.m. ET
“Salary jobs aren’t that elastic,” he said. “It’s difficult to get back a lost job.”
About 10 million people have lost such jobs since the pandemic began, Mr Vyas said.
Mr Modi’s administration this month sought to revitalize the economy by selling nearly $ 81 billion worth of stakes in state-owned assets such as airports, train stations and stadiums. Economists, however, largely see politics as a step towards generating money in the short term. It remains to be seen whether it will lead to more investment, they say.
“The whole idea is for the government to borrow this money from the domestic market,” said Devendra Kumar Pant, chief economist at India Ratings. “But what happens if this project goes to a local player and he has to take out loans in the home market? Your domestic credit demand will not change. “
Dr. Pant added that the question of the willingness of private actors to preserve these assets over the long term and how monetization policies would ultimately affect prices for consumers.
Understand US vaccination and mask requirements
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- Vaccination rules. On August 23, the Food and Drug Administration fully approved Pfizer-BioNTech’s coronavirus vaccine for people aged 16 and over, paving the way for increased mandates in both the public and private sectors. Private companies are increasingly demanding vaccines for employees. Such mandates are legally permissible and have been confirmed in legal challenges.
- Mask rules. The Centers for Disease Control and Prevention in July recommended that all Americans, regardless of vaccination status, wear masks in public places indoors in areas with outbreaks, reversing the guidelines offered in May. See where the CDC guidelines would apply and where states have implemented their own mask guidelines. The battle over masks is controversial in some states, with some local leaders defying state bans.
- College and Universities. More than 400 colleges and universities require a vaccination against Covid-19. Almost all of them are in states that voted for President Biden.
- schools. Both California and New York City have introduced vaccine mandates for educational staff. A survey published in August found that many American parents of school-age children are opposed to mandatory vaccines for students but are more supportive of masking requirements for students, teachers, and staff who do not have a vaccination.
- Hospitals and medical centers. Many hospitals and large health systems require their employees to receive a Covid-19 vaccine, due to rising case numbers due to the Delta variant and persistently low vaccination rates in their communities, even within their workforce.
- New York City. Proof of vaccination is required by workers and customers for indoor dining, gyms, performances, and other indoor situations, though enforcement doesn’t begin until September 13th. Teachers and other educational workers in the city’s vast school system are required to have at least one vaccine dose by September 27, without the option of weekly testing. City hospital staff must also be vaccinated or have weekly tests. Similar rules apply to employees in New York State.
- At the federal level. The Pentagon announced that it would make coronavirus vaccinations compulsory for the country’s 1.3 million active soldiers “by mid-September at the latest. President Biden announced that all civil federal employees would need to be vaccinated against the coronavirus or undergo regular tests, social distancing, mask requirements and travel restrictions.
“In India, things are more likely to get worse than better,” he said, adding that the costs for users of highways and other infrastructure could increase.
During the second wave in May, Mr. Modi defied the demands of many epidemiologists, including Dr. Anthony Fauci, the director of the US National Institute of Allergy and Infectious Diseases, to reinstate a statewide lockdown.
The 2021 lockdowns were nowhere near as severe as the nationwide curbs last year that pushed millions of people from cities to rural areas, often on foot, because trains and other transportation had been shut down.
During the second wave, core infrastructure projects across the country employing millions of local migrant workers were exempted from restrictions. More than 25,000 miles of Indian highway projects as well as rail and urban subway improvements continued.
On Tuesday, Dr. Pant, India’s growth estimates of 20.1 percent for the period April to June are nothing more than an “illusion”. In roughly the same period last year, growth shrank by a record 24 percent so much that even double-digit growth this year would leave the economy where it was two years ago.
Economists say India will have to spend money, or even large, to realize the full potential of its huge low-skilled workforce. “There is a need for very basic primary health facilities, primary services to provide food for children,” said Mr. Vyas. “All of these are very labor intensive jobs, and these are mostly government services.”
One of the reasons Indian governments typically haven’t spent in these areas, Vyas said, is because it was viewed as “not a sexy thing”. Another is the “dogmatic fixation” of governments on keeping budget deficits under control, he said. The government simply cannot rely on the private sector alone to create jobs, Vyas said.
The “only solution,” he said, is for the government to spend and stimulate private investment. “You have a demotivated private sector because there is not enough demand. That is holding India back. “
