Indian economy struggles to rebound after containment

Text by: Sébastien Farcis Follow

India is now the fourth most affected country in the world by the Covid-19 pandemic. More seriously, it is one of the last major countries where contamination is still increasing. A complicated health situation which hampers recovery.

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From our correspondent in New Delhi,

India has been deconfining for a month, but the recovery is slow . Factories in industrial zones outside cities were able to resume in early May, as the virus was concentrated in large cities. And this remained the case until mid-May. But population movements then resumed and more than six million daily workers, abandoned without income in big cities or industrial centers, have returned to their original campaigns for a month. And this has spread the virus to previously untouched areas.

This spread poses  two problems for India's economic recovery . On the one hand, there is a lack of workers in the factories and on the other hand, security measures are being reinforced because of the significant contagion. The large textile production plant Ginni Filaments, located in Uttar Pradesh, 120 km from New Delhi, faces these two problems at the same time.

“  We operate at 70% of our capacity, because we do not have enough manpower. If the workers come back, we have enough orders to operate at 100%. But the other problem is that many cases of Covid-19 have been reported in our area,  "said the director of the weaving section, Balakrishnan Sharma, who stopped recruiting people living around the factory to avoid the virus is spreading around the premises.

India in recession, a first for 41 years

To cope with this slowdown, the government has announced a support plan of 243 billion euros, but many economists are skeptical about its effectiveness. This plan mainly offers lower corporate taxes and facilitates access to the loan. However, the Indian economy is based on millions of small artisans and micro-enterprises who have lost everything and will surely not borrow, even at reduced rates. Direct aid, which represents only 10% of this plan, would be effective in boosting consumption, but it costs much more.

The growth forecasts are therefore very worrying. India has been sailing in recent years at a rate of 4 to 7% annual growth. A high rate for the West but necessary here to absorb the 8 to 10 million young people who enter the job market each year and to help the hundreds of millions of people who still live in poverty.

This crisis should therefore bring India into recession, a first for 41 years. With a GDP that would fall by 3 to 4% in 2020, the country could face dramatic social consequences. The International Labor Organization estimated in April that this crisis could plunge 400 million precarious workers into poverty.

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• India
• Coronavirus
• Confinement
• Economy

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