In Charts: 2020 – The Indian Economy’s Year Of Destruction And Recovery
The Indian economy in 2020 was characterised by a deep recession, but the year closed with expectations of a quick rebound.
The Covid-19 pandemic upended the Indian economy but a deeper-than-anticipated recession may now be making way for a faster bounce-back.
Over one crore Indians have been infected by the pandemic, and per capita income will likely slip right back below an already paltry $2,000 a year amid two straight quarters of contraction in GDP growth so far.
First, a slowdown and then the pandemic meant India’s GDP growth eased to 3.1% in the quarter ended March 2020, before it slipped to -23.9% in the June quarter, showed data released by the Ministry of Statistics and Programme Implementation . GDP contracted by 7.5% in the three months through September, according to the ministry’s latest statement.
The contraction in government expenditure came as a shock, while capital formation saw a smaller than estimated contraction in the September quarter. Private consumption, too, contracted at a decelerating pace aided by pent-up demand and festive demand. It is estimated to grow by 0.1% in the October-December quarter, according to the Reserve Bank of India.
The first advance estimates of national income for the full financial year will be released on Jan. 7, 2021.
Those vulnerable even before the pandemic have lost everything in it, said K Swarna Kumari, secretary of Mahila Action, a non-governmental organisation that works for the welfare of women and children in Visakhapatnam. For instance, of the nearly 10,000 female street vendors, house help and rag pickers that the NGO engages with, about half of them are still without a job, the NGO estimates. For several others, too, the frequency of work has reduced along with lower pay. Of the staff of 30, the NGO itself was able to retain just three women as funds have dried up post-Covid.
A survey on the impact of daily life by Dvara Research, published in December, also found that signs of distress continued ever since restrictions were eased. The study found an improvement of work prospects by June when compared to the early stages of lockdown. However, even when people were engaged in work, most experienced a fall in earnings.
“The impact of this is visible through signs of distress such as consuming lesser food than before, skipping medications and hospital visits due to lack of resources,” stated the study by Niyati Agrawal & Hasna Ashraf. As a result, many low-income households are forced to make choices such as dipping into their cash reserves or borrowing, which are not sustainable in the long run, according to the authors’ observations from 347 microfinance borrower households from across the country.
The Google Mobility Tracker, which became among the most tracked indicators globally of movement and economic activity, showed the hit to retail and recreation sectors was most as contact-intensive services were among the worst impacted amid the pandemic.
Even at the close of the year, mobility trends for places such as restaurants, cafés, shopping centres, theme parks, museums, libraries and cinemas, captured by mobility to places of retail and recreation, was lower by 22% during Nov. 13-Dec. 25, 2020, compared to the baseline of Jan. 3-Feb. 6, 2020. Between March 15-April 26, the indicator had contracted by 86%.
Preliminary merchandise trade data threw up mixed signals around the year.
The hit to foreign trade in April had meant that India’s monthly exports in dollars fell to levels not seen since 2006. Imports are at the lowest since 2009. India’s merchandise exports had collapsed by 60.28% while imports contracted by 45.05% in April. Ever since, foreign trade has fluctuated, with exports contracting by 8.74% and imports contracting by 13.32% in November.
Fearing the virus, a prolonged slump in the economy and locked in, Indians continued to save in 2020. Aggregate deposit growth continued to pick up through 2020, rising after the pandemic’s onset in the country.
Aggregate deposits rose in double digits since May and continued to rise by 11.3% in the week ended Dec. 4, 2020.
Nearly a fourth of India’s labour force found itself unemployed at the peak of the lockdown in April 2020, according to data by Centre for Monitoring of Indian Economy. While the unemployment rate was among the first high-frequency indicators to return to pre-Covid trends, the reversion was at the cost of lower pay and a decline in the quality of work.
Total employment fell to 320.6 million in the quarter ended June 2020, from 406 million in the quarter ended March, according to a note by Mahesh Vyas, managing director at CMIE. Much of this fall was recovered in the quarter ended September when employment was back to 394.9 million. However, in the first month of the third quarter, employment stopped registering any further gains. It slid, said Vyas.
Cumulatively, in October and November, employment fell by four million though weekly estimates for the first three weeks of December indicate a likely marginal improvement in the labour force participation rate. The average LPR in the first three weeks of December at 41.4% was significantly higher than November’s 40%. However, the unemployment rate shot up from 6.5% in November to an average of 9.5% in the first three weeks, Vyas detailed.
As such, employment in the quarter ended December 2020 would be 2.5% lower than the 405 million employed in the December 2019 quarter, estimated Vyas.