INDIA heads for severe recession

Indian markets closed today on account of Christmas -

Heading for a serious situation Indian economy faces contraction in the current and possibly the next financial year following almost a global pattern of pushing a large chunk to extreme poverty, $ 1.90 a day, in India as part of estimated 100 million global new poor by the World Bank. The two months of economic lockdown has caused immense losses. It is slipping into one of the worst recessions. India has been relatively immune to global recessions. Even in the slowdowns of 1991, 1997 Asian Tigers crisis, or 2008 sub-prime, while the growth rate dropped, it never turned negative as now Moody’s or other agencies are projecting. Even the Fitch projection of 9.5 percent growth in 2021 has many riders. The economy is to contract for the next two years even after normalization of the functioning. The real GDP growth has declined from a high of 8.3 percent in 2016-17 to 4.2 percent in fiscal 2019. Moody’s downgrading India to the lowest investment grade of BAA3 projected it to contract by 4 percent in 2020-21 that is minus growth. On this negative figure it projects an 8.7 percent rise in 2021 – that is less than normal growth. The Fitch sees 5 percent fall, presenting a grim picture. There are projections that it can be a Japanese type crash of 1990s. It took Japan ten years to emerge from market crash and credit crunch. In that case, Indian GDP may contract by 10 percent in 2020-21 and by 2.5 percent in 2021-22, according to Arthur D Little (ADL), international management consultancy. The ADL predicts 135 million job losses, 120 million people pushed into poverty and potential loss of $ 1 trillion. It will not be easy to have the $ 5 trillion economy, says though ADL praises prime minister Narendra Modi’s visionary Atmanirbhar Bharat campaign. There is little to cheer even in 2021 as the system virtually has ignored a large chunk of the poor people, who remains cut off from the path that country follows to progress. Inequality is rising fast. Indian Society of Labour and Economics (ISLE) in an online-survey in the last week of May found that the job losses and lower economic growth have given rise to severe inequality. The impact the survey predicts to last over one year and also saw “70 percent of respondents batting for greater devolution of power to the states”. The ISLE survey called for more cash transfers – implied that stress should be on cash economy, stronger public health system, universalize social security and build policies on the welfare and rights of migrants. It also discussed the need for supporting the issues faced by migrants. The economic emancipation is not possible with the neglect of the labour. The well-being of the nation is dependent on the growth of the people who toil hard for the country. If the working class is not taken care of the country is likely to lose the most important lubricant in their capacity to purchase. The 80-crore people, identified by the government needing support during the Covid19 lockdown, have not been integrated with the market. This has resulted in their isolation and abject poverty. The denial has led them to remain docile and without a whiff of sounding their basic needs. The silent march of over 4 crore hungry people across the country is a subject of introspection. The moot question is their tolerance and marching with dignity to home facing often hostile policemen, numerous deaths and shocking less than human treatment as trains, buses and modes of transportation were grinded to halt. It also speaks of the Indian character, that leaves it all to fate and despite the oddest situations does not spring into a post-George Floyd-type protest of the US. They do not evoke response despite suffering humiliation or injustice. Is the silence a democratic tenet? If so, the countrymen should feel happy that it has great strength for rebuilding itself despite neglect of the last seven decades across the political spectrum. The Communist Party of India general secretary D Raja like many other political parties sees it an opportunity to seize the moment for his party. Except for stray words nobody has tried to solve the problem of the marching millions. Poverty is the worst from of violence, Mahatma Gandhi said. But an organized way to correct it remains unseen. Meanwhile, ten states have legislated laws that are harshest for the working class resorting even to 12–hour shifts and gives freedom to employers from adhering to wage rules. Trinamool Congress leader Derek O’Brien extols the MGNREGA for giving crash jobs to large number of poor. Unfortunately, no political party or NITI Agog type organisations have come up with a solution to address the distress. The MGNREGA since 2005 has become a way to keep the abject poverty under cover without a bid to ameliorate the social and economic conditions. The neglect of poor is not the only problem. The economy started contracting in December 2019 itself. The government stopped releasing allocations and by January even restricted departmental spending. The RBI reported that the slowdown even before lockdown had hit the corporate sector as 2696 firms reported 54.3 percent fall in net profit in September 2019 itself as demand weakened and nominal sales contracted”. A group of 505 companies in the services sector had aggregate loss of Rs 53,167 crore; 1706 manufacturing units saw sales decline by 7.7 percent though profits rose by 17.4 percent. Amid such situations, it is least surprising that the country slips into a never before recession. The government is seized of the matter but it is in a financial crisis. It needs to do a lot but is hamstrung. The revival of the economy as a first step must start with decriminalization of the cash transaction. Cash wholesale and retail transactions can boost demand and speed up trade and manufacturing. Spanners of repeated increases of petrol prices are thawing movement, which is further being slowed down by high tolls/fastag. The roads are needed to be opened for free movement. It is catch 22 situations for the government. Pragmatic steps are needed to bolster the economy, pave a fast growth track and inclusive policies for the poor.

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