Current Economic Scenario and Way Forward
The life of billions of people all over the world has been badly affected, since the outbreak of Covid-19, that is, Chinese virus. This has proved to be a big disaster both in terms of the health and economy. In Bharat, so far, with 28.2 million people infected, 3.40 lakh fatalities have been reported due to this Chinese virus, which first surfaced in Wuhan, China in November 2019. The fierce race for the discovery of vaccines to arrest the spread of the virus is on with major breakthroughs in terms of vaccines and medicines. Countries around the world are inoculating their citizens through massive vaccination programs coupled with preventive measures such as lockdowns to break the spread of the virus.
Stringent lockdown measures have seriously impacted the world economy as well as Bharatiya economy, causing a major disruption in the fields such as aviation, tourism, retail, education, automotive, restaurant, and oil and gas sector resulting in severe employee layoffs. According to ILO, in 2020, 8.8 percent of global working hours were lost relative to the fourth quarter of 2019, which is equivalent to 255 million full-time jobs lost. Shockingly, this amounts to a job loss approximately four times greater than that caused by the global financial crisis of 2008.
World Bank report estimates 4.3 percent contraction in global economy in 2020 because of COVID19 pandemic, and estimates 3.6 % contraction in U.S. GDP, 7.4% GDP contraction in European Union, 5.3 % GDP contraction in Japan and 2.6% reduction in aggregate GDP of emerging and developing economies in 2020. Bharat, the world’s sixth-largest economy has also been hit hard by the pandemic last year as its GDP contracted by 7.9%. Country braced the first wave of pandemic outbreak and made some impressive recovery but onset of more severe second wave in April 2021 has wiped out the previous economic gains and dented the economic recovery. Union Government has given more freedom to State Governments to take appropriate decisions based on local situations like imposing lockdown, etc. unlike Centralized decision which happened last year. This has allowed agriculture, small-scale and heavy industry manufacturing sector to keep operating. Nevertheless, 100 million jobs were lost during the nationwide April-May 2020 lockdown, and during the month of May 2021, 15.3 million jobs were lost which hits 18% jobless rate in urban areas of Bharat.
Unemployment has been more pronounced among young workers (15-24 Years age group) who failed to regain employment. Azim Premji University report observes rapid increase in informal employment sector during the pandemic as salaried worker shifted towards self-employment and daily wage activities. It is a foregone conclusion that increasing health expenses and reduced employment opportunities have further worsened the economic situation of poorer households, increased poverty level and contributed to wealth disparities.
On the other hand, Motilal Oswal Financial Services Ltd., found that Bharat’s household savings dipped to 22.1% of GDP from 28.1% during April-June 2020 which is an alarming issue. The depleting household savings and falling incomes will have an adverse effect on domestic consumption and health care of the family, which accounts for about 60% of GDP, apart from impacting capital formation.
Government relief measures like free rations, cash transfers, MGNREGA, PM-KISAN SAMMAN NIDHI payments, pension payments Pradhan Mantri Garib Kalyan Yojana (PMGKY) and the Atmanirbhar Bharat packages have provided the soothing effect to most vulnerable population from pandemic in 2020. Swadeshi Jagran Manch (SJM) appreciates Central Government’s fiscal and stimulus policy response both Atmanirbhar Bharat Package as well as freely available liquidity of Rs. 15,000 Crores loan to the service sector announced on 4th June 2021 to tackle the present health and economic crisis caused by COVID19. However, SJM firmly believes that the mayhem caused by the Pandemic can be overcome only by the concerted efforts of every section of the society. In this unprecedented difficult situation of the country, the SJM suggests;
1. To consider and extend fiscal support to the vulnerable sections of the society in addition to free food grains.
2. Substantially increase the fund allocation for MNREGA to support rural employment.
3. The Emergency Credit Line Guarantee Scheme should be extended for a few more months and its scope can be further expanded to other pandemic hit sectors.
4. Specific stimulus to sectors most affected by Corona virus induced lockdowns i.e., construction, fishing, horticulture, etc. – in terms of soft loans.
5. To announce a package for employment linked incentives (ELI) to strengthen MSME sector.
6. The Reserve Bank of India should clearly announce need based moratoriums to suit every sector of the economy and direct the banks for liberal monetary support.
7. Corporate and business houses should fully support to manage the difficult situation by liberal contribution for Covid relief, payment of salaries to employees without retrenchment and timely payment of dues to MSMEs,
8. The private health care providers should realise that this is not the time for making profits and ensure treatment with minimum cost.
The pandemic has removed the illusion that urbanisation is a measure of development. It has been conclusively proved that with the aid of technology, substantial economic activity can be carried from remote or rural areas also thereby providing opportunity for a more dispersed and decentralised growth model with substantial employment contribution.
The SJM firmly believes in the inherent strength of Bharat and is resilient enough to tide over the situation. Let us all work together with mutual trust and help to put the country back to glory at the earliest.