India’s Economy Shrank Nearly 24 Percent Last Quarter
India’s Economy Shrank Nearly 24 Percent Last Quarter
NEW DELHI — The Indian economy contracted by 23.9 percent in the second quarter, the most drastic fall in decades, as lockdown restrictions meant to contain the spread of the coronavirus wiped out jobs and businesses.
India’s decline was the worst among the world’s top economies, with the U.S. economy shrinking 9.5 percent in the same quarter and Japan’s 7.6 percent.
Data released by the Indian government on Monday showed the extent of the collapse in gross domestic product in the three months ending in June, with the construction, manufacturing and transport industries among the hardest hit. The figures reflect the onset of India’s deepest recession since 1996, when the country first began publishing its G.D.P. numbers.
India’s picture is further complicated by the fact that so many people here are “informally” employed, working in jobs that are not covered by contracts and often fall beyond government reach, such as rickshaw driver, tailor, day laborer and farmhand. Economists say that official numbers are bound to underestimate that part of the economy and that the full damage could be even greater.
“The strict lockdown led to a sharp contraction in activity in Q1 with job or income losses being faced by people,” said Aditi Nayar, an economist at ICRA, an investment and credit rating agency in New Delhi. “Less formal sectors could manifest in a deeper contraction when revised data is released subsequently.”
In late March, Prime Minister Narendra Modi initiated one of the most severe lockdowns anywhere, ordering all Indians to stay inside, halting transportation and closing most businesses.
Millions of workers who over the years had been drawn to the urban centers for jobs started returning home to rural areas. But as the ailing economy contracted even more, officials desperate to stimulate business lifted some of the lockdown restrictions, allowing more movement, which led the virus to spread wide and far. The country is now recording the world’s highest number of daily new infections.
Just a few years ago, India, with a population of 1.3 billion people, was one of the world’s fastest-growing large economies, clocking growth of 8 percent or more.
But even before the pandemic, the economy had begun to slow down. For example, car sales plunged 32 percent in August last year, the largest drop in two decades.
The data released on Monday showed that consumer spending, private investment and exports had all suffered tremendously. The sector including trade, hotel and transport dipped 47 percent. India’s once mighty manufacturing industry shrank 39 percent.
The only bright spot, though relatively faint, was agriculture. Thanks to strong rains this monsoon season, the sector grew 3.4 percent versus 3 percent in the previous quarter.
Economists said that the surging coronavirus cases in the country might push recovery further away and that the central bank would increasingly come under pressure for additional stimulus payments and rate cuts.
Ms. Nayar, the economist, said that while some parts of India’s economy had started to recover, the rising number of infections and the steps taken to contain them suggested an uneven recovery. India has had 3.6 million infections (the third-highest number, after Brazil and the United States) and around 80,000 new cases reported each day, which are far more than anywhere else. Its death rate, though, remains substantially lower, which epidemiologists say is a result of a younger population than that of many countries.
Across India, many of the 28 states swing between opening up their economies and suddenly locking them down again, throwing businesses into confusion and keeping many people away from markets and shopping malls.
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Frequently Asked Questions
Updated August 27, 2020
What should I consider when choosing a mask?
- There are a few basic things to consider. Does it have at least two layers? Good. If you hold it up to the light, can you see through it? Bad. Can you blow a candle out through your mask? Bad. Do you feel mostly OK wearing it for hours at a time? Good. The most important thing, after finding a mask that fits well without gapping, is to find a mask that you will wear. Spend some time picking out your mask, and find something that works with your personal style. You should be wearing it whenever you’re out in public for the foreseeable future. Read more: What’s the Best Material for a Mask?
What are the symptoms of coronavirus?
- In the beginning, the coronavirus seemed like it was primarily a respiratory illness — many patients had fever and chills, were weak and tired, and coughed a lot, though some people don’t show many symptoms at all. Those who seemed sickest had pneumonia or acute respiratory distress syndrome and received supplemental oxygen. By now, doctors have identified many more symptoms and syndromes. In April, the C.D.C. added to the list of early signs sore throat, fever, chills and muscle aches. Gastrointestinal upset, such as diarrhea and nausea, has also been observed. Another telltale sign of infection may be a sudden, profound diminution of one’s sense of smell and taste. Teenagers and young adults in some cases have developed painful red and purple lesions on their fingers and toes — nicknamed “Covid toe” — but few other serious symptoms.
Why does standing six feet away from others help?
- The coronavirus spreads primarily through droplets from your mouth and nose, especially when you cough or sneeze. The C.D.C., one of the organizations using that measure, bases its recommendation of six feet on the idea that most large droplets that people expel when they cough or sneeze will fall to the ground within six feet. But six feet has never been a magic number that guarantees complete protection. Sneezes, for instance, can launch droplets a lot farther than six feet, according to a recent study. It’s a rule of thumb: You should be safest standing six feet apart outside, especially when it’s windy. But keep a mask on at all times, even when you think you’re far enough apart.
I have antibodies. Am I now immune?
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I’m a small-business owner. Can I get relief?
- The stimulus bills enacted in March offer help for the millions of American small businesses. Those eligible for aid are businesses and nonprofit organizations with fewer than 500 workers, including sole proprietorships, independent contractors and freelancers. Some larger companies in some industries are also eligible. The help being offered, which is being managed by the Small Business Administration, includes the Paycheck Protection Program and the Economic Injury Disaster Loan program. But lots of folks have not yet seen payouts. Even those who have received help are confused: The rules are draconian, and some are stuck sitting on money they don’t know how to use. Many small-business owners are getting less than they expected or not hearing anything at all.
What are my rights if I am worried about going back to work?
Mr. Modi has said he wants his country to become a $5 trillion economy by 2024 — the next major election, in which he is expected to run for a third term. In 2019, India’s G.D.P. was around $2.9 trillion, making it the world’s fifth-largest economy, behind the United States, China, Japan and Germany. But next year, many economists believe, India’s economy could be 10 percent smaller.
Arun Kumar, a professor at New Delhi’s Institute of Social Sciences, said the informal part of India’s economy, which includes the millions of migrant workers who have lost their jobs, had suffered an even bigger blow than most people realized.
“My estimate is after the government takes the unorganized sector into account,” he said, the overall economic slide will be “minus 40 percent.”
On Thursday, India’s finance minister, Nirmala Sitharaman, blamed all of the country’s economic woes on the coronavirus.
“It is an act of God,” she said during a meeting with representatives from state governments, who have been begging for more federal help.
But opposition politicians have reiterated that India’s economy had been stumbling for years under Mr. Modi, long before the pandemic. On Monday, after the dismal G.D.P. figures were released, they made fun of Ms. Sitharaman, saying that if the agriculture was the only part of India’s economy doing well, it must be thanks to an “act of the Rain God.”