India was headed for a strong recovery post-2020, with international merchandise trade having reached $34 billion in March and stayed over $30 billion in April, but now all that and much more has been crushed by the surging second COVID-19 wave.
The daily case count rose from 81,000 on April 1 to more than 402,000 on April 30. India’s healthcare system came at the brink of collapse the same month. With the outbreak getting worse, state governments have taken it upon themselves to impose restrictive lockdown measures to contain the virus. And this is having a negative impact on the much needed economic recovery.
According to the Centre for Monitoring Indian Economy, the unemployment rate grew from 6% in March to 8% in April. Studies show that more than 200 million Indians are expected to fall into poverty as a result of shutdowns and healthcare costs. The S&P has now downgraded Indian GDP growth to 9.8%.
With analysts predicting the second wave to recede by June, the Centre needs to start rebuilding the economy. Bloomberg report states that the most immediate involves vaccinations, choosing which sectors of the population get inoculated first will mitigate the negative impact on the GDP. Government spending boost will help backstop the downslide. Finally, structural changes must be initiated to ensure that India’s prowess in technology and manufacturing is leveraged to its highest potential.
Analysts recommend for focus to be placed on vaccinations in the 53 cities with populations of a million-plus each. They are hubs of economic activity and need to be de-risked from a third wave. Workers in customer-facing businesses such as hospitality, restaurants, aviation, storefront retail, local transportation and commercial real estate should have priority. These sectors have taken a hard knock, as in every other country, thus inoculations will help build confidence for consumers to patronize them and move about again.
Furthermore, government spending must follow. The report brings to the fore that at the end of 2019, the government had released a National Infrastructure Pipeline, outlining capital expenditures of Rs 120 trillion over five years. However, this ran into the onset of the pandemic. This program should be expedited.