The coronavirus sent shock waves down many countries and the impact was clearly visible in the quarterly GDPs where every major country except Vietnam showed a contraction in the economy. The OECD published a report on Wednesday updating its forecast for global economic output this year. They said that the declines have been “unprecedented in recent history,” but the figures seem to have improved slightly since June. The Paris-based agency said that the world economy has shrunk by 4.5% in 2020, but it is expected to expand by 5% in 2021. The previous speculation of OECD has been that the global economy will contract by 6% and then grow by 5.2% next year. The agency has now increased its expectations from the United States, China and slightly raised its outlook for Europe. But they estimate a poor performance from developing countries like Mexico, Argentina, India , Indonesia and Saudi Arabia.
India’s current standing
Amongst all the G-20 countries, India has the poorest economy so far. It recently saw a contraction of 23.9% in its Q1FY21 GDP. Due to the decrease in demand during the lockdown, the economy has seen a steep downfall. There are many stimulus packages being offered, but there are no benefits or wage subsidies to help the small and medium scale businesses. The migrant labour crisis of India in April was the largest labour crisis the world had ever seen. The unemployment rate has fallen to 11% in June 2020, with a record high of 23.5% in the last two months.
The new epicenter of the coronavirus
As the global cases of coronavirus infections rise above 30 million, India comes out to be the new epicenter with a population of 1.3 billion. It has reported a new world record of 97,894 cases in a single day on 17 September. India now accounts for more that 16% of global known cases and the infections are expected to surpass the highest records of the US within the next few weeks. As 80% of the COVID-19 cases are in the urban hotspots that contribute to 70% of the GDP, India’s economy is seeing a major risk.
Policies to revive the economy
The government has started taking steps for unlocking but there are no concrete decisions on its policies to revive the economy. The GST shortage, loan suggestions to the states and removing export benefits are some policies that are further weakening the system of recovery. Instead of boosting foreign trade and investment, India is shutting digital trade with China and making it more difficult for foreign investors to trust the Indian market over constant communal riots and religious inclinations. So far, nothing substantial has been done for the economic revival of the country, as reflected in the OECD data as well.
The Policytimes Suggestions
- The government has still not made any major comments on the staggering economy of the country and seems to offer stimulus packages and loans that are not of any direct benefit to the citizens.
- As the SBI investors said that now is the time for implementing “activist” financial policies and the RBI can only support to an extent.
- The central government is also not ready to take any responsibility for the downgrade, and the Finance Minister even called this an ‘act of God’ but the system of reformation and restoration can only begin with an acknowledgement.