Economy

Abstract

Even before the global novel coronavirus disease (COVID-19) pandemic reached India in March 2020, the country’s economic growth performance was appearing subdued. Provisional estimates of economic growth for the financial year 2019/20, published by the National Statistical Office in late May 2020, were 3.9% for gross value added (compared with actual growth of 6.0% in 2018/19), 7.3% for net taxes on products (7.0% in 2018/19) and 4.2% for growth in gross domestic product (GDP), representing a potential decline of 1.9 percentage points from the GDP growth of 6.1% recorded in 2018/19. These low levels of growth were largely the result of negative growth in the manufacturing and construction sectors in the last three months (1 January–31 March) of 2019/20. This, in turn, was at least partly a consequence of the pandemic induced ‘lockdown’ which began on 25 March 2020 and was still operational in various forms in many parts of the country in July of that year. The complex economic crisis affecting India in early 2020 had at least four fundamental elements. These were: (i) a health crisis and an economic crisis that fed on each other, in that measures taken by the Government in an effort to curtail the health crisis (e.g. the imposition of a three-week ‘lockdown’, which placed severe restrictions on movement and assembly, closed state borders and prohibited international air travel) led to an economic crisis. However, the economic crisis in turn reduced resources available for tackling the health crisis. (ii) The crises evolved over time, with the transmission of the coronavirus being dependent on contact between humans, while at the same time the economic crisis was precipitated by shrinking economic activity in a number of key sectors, which then gave rise to secondary effects on other sectors of the economy and on the labour force. (iii) Consequently, there could be no easy way of predicting how the twin crises would play out over time, and hence there was considerable uncertainty about the likely consequences of policy initiatives. (iv) Finally, the worldwide search for an antidote to COVID-19 was still in progress in mid-2020, so that in the absence of an effective treatment,many countries, even those with otherwise robust health systems, were facing critical shortages of essential medical supplies needed to manage the disease, such as testing kits, ventilators, personal protective equipment (PPE), oxygen supplies and the like.