The COVID-19 Pandemic, India and the World

Economic and Social Policy Perspectives

Rajib Bhattacharyya, Ananya Ghosh Dastidar, Soumyen Sikdar, Rajib Bhattacharyya, Ananya Ghosh Dastidar, Soumyen Sikdar

• Publisher: Routledge India
• Year: 2021
• ISBN:
  9781000463064
• Edition: 1
• Topic: Business
• Subtopic: Business generale
• Index: Business

This book analyses the economic and social impact of the Covid-19 crisis with special focus on India. It examines the economic disruption caused by the pandemic, policy responses to it and the prospect of a severe global recession. It also covers how the pandemic has contributed to considerable suffering among the masses and affected socio-cultural relationships, behavioural patterns and psychological attitudes governing human interaction.

A topical and timely collection on the pandemic, the essays in the volume discuss several key themes which include,

· The Corona pandemic and the changing global economy; growth, trade and macroeconomic recovery;

· Public health and policy failures; appropriate policy response;

· Impact on education; guidelines for the future;

· Idea of economic herd immunity; impact of India's lockdown, crisis of the migrant labourers;

· Impact on agriculture, industry, firms, households and the informal sector;

· Implications of digital technology for production, labour and labour relations;

· Violence amidst the virus; Covid 19 and Hindu- Muslim conflict in India, domestic violence, questions of occupation, identity, gender and vulnerability;

· De-globalisation and environmental challenges in the post-Covid era.

Engagingly written, this comprehensive volume compiles original research by leading economists from India and abroad. It will be useful for scholars and researchers of economics, of the Indian economy, development economics, development studies, labour studies, public policy, public administration, governance, sociology and political economy.

1 Corona pandemic and the changing global economy

Rajib Bhattacharyya, Ananya Ghosh Dastidar and Soumyen Sikdar

DOI: 10.4324/9781003220145-1

1.1 Introduction

The largest unprecedented and devastating health shock of the twenty-first century appeared with the outbreak of Covid-19 virus, which was first detected by the end of December 2019 in Wuhan city of China. The reported cases started increasing from the end of January 2020 outside mainland China. By the end of March 2020, this outbreak had affected so many countries that WHO declared it a ‘pandemic’. Indeed, it has already been proved that this kind of health pandemic may be far more fatal than devastations wreaked by a war. It has brought the world to a standstill and thrown before it the challenge of ‘life or livelihood’. It has already generated tremendous human suffering and major economic disruption. The devastation of this health pandemic has made economists predict that the second phase of the battle would be even more severe and may take the world back to the days of ‘The Great Depression’ of the 1930s.

On the macroeconomic front lockdown and other containment measures initially resulted in disruption of supply chain and production of goods and services and hence had an adverse effect on gross output. The most severe impact of this pandemic is the drastic rise in unemployment, particularly in the unorganized informal sector, which accounts for a major proportion of employment in emerging countries like India, Brazil and Mexico, to name only a few. Manufacturing activities other than those of essential items have been virtually stalled. Other than manufacturing, industries such as wholesale and retail trade, transport, tourism, storage, communication, construction, real estate, hotels and restaurants, art, entertainment, recreation and accommodation were among the worst hit segments of the economy. Work from home has become a regular schedule of many employees during lockdown. The restrictions imposed on production and transport systems had a positive impact on environmental quality across the world especially during the lockdown. It has also significantly affected the socio-cultural relationships, behavioural patterns and psychological attitudes governing human interactions. It has heavily underscored the importance of digital platforms in the provision of services, especially in the fields of education and banking. Currently the entire global economy is trying to combat the pandemic in terms of region- or country-specific revival policies amid extreme uncertainty.

The flowchart in Figure 1.1 attempts to capture the impact of Covid-19 pandemic on economy and society.

FIGURE 1.1 Economic and social impact of corona pandemic.

Source: Authors’ construction.

The corona pandemic has affected every aspect of life across the entire world. Entire ways of life and livelihoods are being forced to change and adapt to the new normal, the shape and substance of which is yet unclear. As the ‘utterly abnormal’ becomes routine and widely accepted as the new normal, this book brings together original essays on a wide range of development issues. The authors identify areas for concern, and provide deep insights into how these issues may be analysed as well as directions for policy, especially for emerging nations like India.

A variety of issues have been discussed herein, ranging from economic growth, trade and overall macroeconomic recovery to conflicts between nations, and between communities and trust placed by societies in governments in pandemic times. Appropriate policy response to the economic pandemic, implications of digital technologies for production, labour and labour relations as well as issues concerning specific groups such as widowed women and migrant workers are explored in various chapters in the present volume.

1.2 Economic impact: growth, employment and trade

Here we briefly discuss the impact of the pandemic on some major macroeconomic variables, viz., aggregate output, employment and international trade.

1.2.1 Economic growth

There will be a major setback to output growth as per estimates of major international organizations like the OECD, Asian Development Bank (ADB), UNCTAD and WEO. The disruption of global demand and supply chain coupled with the adverse impact on the financial markets translates into major contraction of economic growth and revisions in the global economic growth projections.

According to the OECD (March, 2020; June 2020), the world economy is expected to grow at 2.4% (instead of the initial estimate of 2.9%), while the growth of the European nations is expected to slow down from 1.2% to 0.8%. The adverse impact on confidence, financial markets and the travel sector and disruptions to supply chains all contribute to the downward revision of growth estimates in all G20 economies in 2020, especially those with strong links with China, such as Japan, Korea and Australia. According to the UNCTAD forecast (9th March, 2020), ‘Covid-19’ shock will trigger a recession in some countries and a deceleration of global annual growth to below 2.5%, often taken as the recessionary threshold for the world economy. Abiad et al. (2020), Dev and Sengupta (2020) have portrayed three different situations – best, moderate and worst case – depending on the intensity of future spread of the pandemic. Following the downward revision in consumption growth, reflecting a sharper than anticipated disruption activity, the WEO (World Economic Outlook, June 2020) has projected a global GDP growth of −4.9%. Weaker private consumptions, due to lockdowns and social distancing, coupled with rise in motives for precautionary savings along with subdued investment plans of firms are mainly responsible for this adverse shock to aggregate demand. According to Global Economic Prospects, June 2020, World Bank Group, the growth predictions are even gloomier. It estimates negative growth for the world economy (−5.2%) and across major economies around the globe, including the USA (−7%), Euro Area (−9.1%), Japan (6.1%) and India (−3.2%), to name only a few. Estimates in the Monthly Economic Review (August, 2020), Government of India, for the April–June quarter also point to significant global contraction of output on a year-on-year basis. In the case of India, RBI estimates (Table 1.1) indicate a sharp contraction in key macroeconomic variables like GDP, private final consumption expenditure (PFCE) and gross fixed capital formation (GFCF) in real terms in 2020–21; it is likely to be followed by some recovery in 2021–22 as restrictions are eased. Only agriculture and its allied activities are expected to register positive growth, while both industry and services are likely to shrink in 2020–21.

TABLE 1.1 India’s growth predictions in GDP, GVA and its components (%)

	2020–21	2021–22
1. Real GDP growth rate	–7.6	9.5
Real PFCE growth rate	–9.4	11.9
Real GFCF growth rate	–14.5	12.1
Real GVA growth rate	–7.3	9.3
Agriculture and allied activities	3.4	3.1
Industry growth rate	–7.7	11
Services growth rate	–9.6	10.1
Gross saving rate	29	28
Gross capital formation rate	26.9	28.1

Source: Authors’ calculations based on RBI – Survey of Professional Forecasters on Macroeconomic Indicators – 68th round (January 12–29 2021).

Indeed, India’s GDP contraction (23.9%) is the highest when compared with other nations such as the USA (9.1%), UK (21.7%), France (18.9%), Spain (22.1%), Italy (17.7%), Germany (11.3%) and Japan (9.9%). This severe contraction has been attributed to the most stringent lockdown measure implemented in India (as reflected by the Government Response Stringency Index, of the Oxford University, which assigned a value of 85.6, the highest in the world). It has been argued that the lockdown has enabled India to achieve the lowest fatality rate (1.78%, as on 31 August 2020) and has given an opportunity to restructure the health and testing infrastructure in the country. However, the move has also been widely criticized for its impact on livelihoods especially in the informal sector and on migrant workers. In this context, Debraj Ray, S. Subramanian and Lore Vandewalle discuss the contours of an alternate policy response in the chapter ‘India’s lockdown’, based on age-graded, rather than blanket restrictions on the working population. Despite the lockdown India has occupied the first spot for a continuous period of 50 days in terms of the highest daily infected from Covid-19 in the world. Currently, even as the surge in Covid cases continues, economic priorities have taken the centre stage, especially in emerging nations, and lockdown measures are being relaxed in gradual steps. The strategy suggested by Ray et al. is especially relevant at the current conjuncture. It would benefit the self-employed in the informal sector, who are most vulnerable as their meagre incomes and savings offer little scope for consumption smoothing in the face of such disruptive shocks. Another aspect of India’s lockdown relates to its impact on the population of migrant workers. Given hardly any time to plan, the total shutdown of economic activity left many of these workers stranded, without the means to sustain themselves in cities. The government’s response in the initial days of the lockdown reflected a lack of anticipation regarding their plight. As hordes of such workers took to the streets in desperation, a series of special trains were arranged for their journey back to rural hinterlands. Did the movement of migrants actually enhance the spread of Covid across India? This question is explored empirically in the chapter ‘Lockdowns, migrants and the spatial distribution of Covid-19 cases in India: consequences of a “tough and timely decision”’ by Zakir Hussain and Richa Kothari, on the basis of extensive spatial analysis on the movement of ‘shramik’ trains and spread of the disease. Given that Covid can happen again, the response, especially if it involves drastic mea...

Table of contents

• Cover
• Endorsements Page
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• List of figures
• List of tables
• Notes on contributors
• Preface
• Acknowledgements
• 1 Corona pandemic and the changing global economy
• Part I Conflicts, trust and society
• Part II Macroeconomic issues and environment
• Part III Sectoral perspectives
• Part IV Health, education and labour
• Index