New Delhi- Manoj Kumar was just getting his head above water again after dipping into his savings to get through India's sudden pandemic lockdown last March, earning 600 rupees ($8) a day as a construction worker in the tourist hotspot of Goa.
He'd saved enough for a trip to his native village in Bihar, 1,490 miles away, for a wedding last month. He's already trapped in one of the country's poorest nations, as a second Covid-19 wave unleashes the world's worst health epidemic and prevents his return. On a good day, he could land some odd jobs that pay up to 300 rupees. However, there aren't many of those tasks left. As a result, he is relying on loans to feed and clothe his wife and three children.
"It's all in God's hands now," Kumar said, adding that he's told his wife to cut down on purchases such as lentils, cooking oil, and clothing. "I don't know when I will return. My family is worried and doesn't want me to go back as the cases are also rising in Goa." Read more
Kumar, 40, is one of India's millions of migrant workers, who make up half of the country's $2.9 trillion domestic demand-driven economies. A long-running Covid outbreak is minimizing people's incomes and wiping out their savings, presenting double trouble for Asia's third-largest economy, which is still recovering from last year's pandemic-induced recession. Read more
According to government estimates, India's gross domestic product shrank by 8% in the fiscal year ending in March, the largest drop since 1952. Many analysts are lowering their growth estimates for the current fiscal year, citing growing unemployment and shrinking savings as its reasons. S&P Global Ratings' chief economist for the Asia Pacific, Shaun Roache, reduced his forecast from 11 percent to 9.8 percent. The economy will grow by 9.5 percent, according to Fitch Solutions, which is lower than the Bloomberg consensus of about 11 percent.
"A drawn-out Covid-19 outbreak will impede India's economic recovery," Singapore-based Roache said. "The country already faces a permanent loss of output versus its pre-pandemic path, suggesting a long-term production deficit equivalent to about 10% of GDP."
Total infections in India have risen to 21.89 million caused by a new coronavirus strain, with a third of those added in the last three weeks alone. On Saturday, the daily death toll reached a new high of 4,187. Experts have cautioned that the crisis could escalate in the coming weeks, with one model forecasting 1,018,879 deaths by the end of July, four times more than the current official count of 238,270.
India's poor are likely to bear the brunt of new travel restrictions imposed in some of the country's most important economic centres to control the outbreak, just as they did in 2020. They have yet to recover from Prime Minister Narendra Modi's order for a lockout in late March of last year. Migrant workers from cities like Mumbai and New Delhi were forced to travel hundreds of miles to return home as a result of the harsh and abrupt measures.
Kumar is a typical example of someone who works without a contract and for a pittance. According to estimates by Jeemol Unni, an economics professor at Ahmedabad University, the so-called informal economy in India employs approximately 411 million people, based on surveys conducted by the government's National Statistical Office. The low-paying farm sector employs the majority of them while construction employs around 56 million.
Since they are not covered by unions or lawmakers, these workers often lose out on government handouts. They have nothing left over after meeting regular expenses to pay for health care and medications, which is a dangerous situation, particularly when a pathogen is killing people and sending thousands to intensive care in overcrowded hospitals that are running out of beds.
Domestic consumption, which accounts for nearly 60% of GDP, would be impacted by depleted household savings and declining incomes, according to economists. According to a report conducted by Nikhil Gupta, an economist at Mumbai-based brokerage Motilal Oswal Financial Services Ltd., India's household savings fell to 22.1 percent of GDP in the third quarter of this year, down from 28.1 percent in the third quarter of last year. According to him, India's savings growth lagged behind that of the United States, the United Kingdom, and Japan for the entire year.
A slower rise in household savings, coupled with similar or slower decline in consumption, confirms weak income growth in India," Gupta said. "If so, the contribution of pent-up demand in growth recovery would also be limited in India compared with other nations."
According to data from the Center for Monitoring Indian Economy Pvt., a private research company, the unemployment rate in April increased to nearly 8% from 6.5 percent in March, with more than seven million people leaving the workforce last month.
In India, income inequality is widening as a result of the turmoil that began last year. According to a Pew Research Center survey, 75 million people have fallen into poverty since the pandemic started. The second wave is expected to wreak even more havoc. Pew Research Center described daily incomes of 150 rupees or less as poor, 151 to 750 rupees as low income, and 3,750 rupees or more as high income in the report.
Even more troubling figures were found in a study conducted by Bangalore's Azim Premji University. During the pandemic, about 230 million people fell below the national regular minimum wage threshold of 375 rupees, according to the study.
India may still be one of the world's fastest-growing economies, but it will still be one of the most unequal, according to Oxfam, a non-profit organization.
In a recent interview, Stephen Schwarzman, chairman of Blackstone Group Inc., said that he is "confident" in India's long-term prospects. The private equity group, which has invested billions of dollars in the country and owns many of the country's major office buildings, announced that it will ramp up its operations in the country. He said that in the next ten years they will invest more than we have in the previous ten years.
Former governor of India's central bank Duvvuri Subbarao said the unrest among informal-economy employees could damage the country's long-term growth prospects. "Inequalities have intensified because the formal sector has nearly normalized while the informal sector remains distressed," he said.