The COVID-19 pandemic has had a significant impact on the Indian economy, as detailed by the Financial Times in an article covering the country’s response to the challenges posed by the pandemic.
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Q2 contractions for India, other large economies
India’s economy contracted by an annualized 23.9% in the second quarter ending June 2020, the Financial Times reported, as if that was an exceptional decline.
In fact, the U.K. and several European economies contracted the same amount.
Like India, they have begun to recover since.
With that said, nowhere is back to pre-pandemic levels.
Unemployment levels surge in India
Economically, more worrying for India is the level of unemployment.
Lockdown related to the pandemic caused an estimated 140 million job losses, the article notes. The pandemic hit after four years of gradually falling GDP growth – itself a cause of considerable worry when the rest of the world economy had been doing quite well.
India was falling below the level needed to create meaningful employment for its growing younger generation of job seekers.
Virus cases rise despite lockdown measures
More worrying for health officials is the lockdown has failed to stop the spread of the virus among the population. The country is detecting more new coronavirus cases than any other — with about 79,500 infections confirmed in the past 24 hours, the Financial Times reports.
At the current pace, India is expected to soon surpass Brazil in terms of cumulative COVID-19 cases, second only to the U.S.
The official death toll in India stands at 65,000. That compares with more than 183,000 lives in the U.S. and more than 120,000 in Brazil. Some put India’s number down to a relatively young population and hardy resistance to disease. However, the number may equally be due to underreporting of deaths due to the virus as opposed to deaths due to other complications.
Since the end of the lockdown, the economy has been recovering.
The Financial Times cited investment bank Nomura, which said the pace of normalization was faltering.
The investment bank estimated aggregate demand in July reached just 67% of pre-pandemic levels. In August, the imposition of localized state-level lockdowns disrupted economic activity. New Delhi has now prohibited those lockdowns in the interests of encouraging economic recovery.
Like many countries, India is walking a fine line between controlling the spread of the virus and minimizing economic damage.
Unlike better-funded, mature economies, India does not enjoy the financial reserves or have the latitude to take on massive borrowing to support the economy. Priyanka Kishore, head of India and South East Asia Economics at Oxford Economics, is not alone in saying the central government needs to spend more to support incomes and, hence, consumption if it wants to see a sustainable economic recovery.
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