Indian economy to take hit by record spike in COVID-19 cases: US Chamber of Commerce

The US Chamber of Commerce has warned that the Indian economy could falter as a result of a record spike in COVID-19 cases, creating a drag for the global economy.

Myron Brilliant, executive vice president of the Chamber, told Reuters that the risk of spillover effects was high given that many US companies employ millions of Indian workers to run their back-office operations. “We expect that this could get worse before it gets better,” she said. “There’s a big concern about the drag on the US economy by a devastating, spreading virus in India.”

But experts say India’s economy was already crisis-ridden before the pandemic struck, due to a huge, largely self-created slowdown – a direct consequence of, among other reasons demonetization, haphazard implementation of the GST and global trade problems. The addition of the pandemic represented a double attack on the Indian economy, which needed a massive thrust to boost domestic consumption at this critical hour.

Early this month, the IMF had raised its growth forecast for India for this year to 12.5%. But IMF chief economist Gita Gopinath warned that the calculations predated the latest, “quite concerning” wave. “The next few months will be critical, as the renewed COVID-19 surge challenges India’s immature recovery,” Oxford Economics, a research group, said in a note, citing possibilities including a hard lockdown, rising deaths and a faltering vaccination campaign as the biggest threats to growth.

India’s economic indicators improved significantly in January and February, when cases fell to about 10,000 a day. But the mounting stress has taken a toll, with an index of business activity tracked by Nomura registering its biggest drop in 12 months in the first week of April.

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However, the pandemic has worsened the gap between the rich and the poor in India. A recent study by the Pew Research Centre estimates that the ranks of poor in India have increased by around 7.5 crore in the last year, since the brunt of income loss and job cuts has been most borne by the lower economic classes of the population, mostly those who work in the unorganized sector. The middle class section has shrunk as well in India.