COVID-19 has impacted the entire world economically, politically and culturally. Economic woes of countries amid Covid-19 are long-lasting, having adverse implications for the global economy. India, on the other hand, the second most populous country after China has remained failed in combating the pandemic. The country after the US has been recording world’s largest confirmed infections cases. A prior strict lockdown and currently increasing Covid-19 cases have been resulting in Indian rapid economic recession. India with contracting rate of -23.9% during the pandemic has become the largest contracting economy of the world. The fastest and largest contracting rate of the economy puts it in the deepest economic recession the country since its independence never confronted such big economic blow. India will have to create 90 million non-farm jobs by 2030 to absorb employment of younger generation. However, creation of 90 million jobs by 2030 with prevailing -23.9% contracting rate appears to be impossible. McKinsey Global Institute estimates that India needs to accelerate its economic growth rate with 8 to 8.5% in the post- Covid-19 era to achieve stipulated goal that currently seems to be an uphill task with deteriorating economic growth rate of 3.1%.
Indian remittances in 2020 have witnessed a sharp decline. The World Bank in its recent report unveils that “remittances to India would fall this year by nine per cent to $76 billion due to the ongoing coronavirus pandemic and global economic recession”. Meanwhile, Indian tourism industry contributes significantly to the tourist sector is now in a fragile situation. Industry Chamber CII, maintains that “The coronavirus pandemic has given a crippling blow to the Indian travel and tourism industry…The entire value chain linked to Travel & Tourism is likely to lose around $65.57 billion, with the organized sector alone likely to lose $25 billion,” Strict lockdown during the pandemic caused unbearable hardships for daily wagers working in restaurants and hotels. India’s National Restaurant Association prognosticates that 40% Indian restaurants are unable to survive the pandemic. The hotels and trade have endured contraction rate at 47% resulted in soaring unemployment. Indian economy, thus, is expected to be falling behind other South Asian countries economies such as Pakistan, Bangladesh and Sri Lanka.
Indian GDP has rapidly been shrinking; GDP growth rate of the country in March 2018 was 8.2% that has declined to 3.1% in August 2020. Consumption demand in Indian economy plays a pivotal role in reinforcement of the economy. Private Final Consumption Expenditure (PFCE) in 2019-20 contributed approximately to 57% in India’s GDP. However, in March 2020, PFCE growth collapsed to nearly 2.7% quarter, the lowest since June 2012. Exacerbating investment demand paves the way for negative implications for the growth potential of economy in the future. India has also failed to host Indian Premier League (IPL) in India due to surging Covid-19 cases. Shifting of IPL cricket matches from India to UAE resulted the loss of Rs. 4,000 crores to the Indian economy. Modi is unwilling to learn a lesson from ongoing economic woes, he further plunges Indian economy into quagmire, overlooking regional integration moving the country towards isolation. In 2019, he pulled his country put of Regional Comprehensive Economic Partnership (RCEP). RCEP economic block consists of 10 members of ASEAN including China, Australia, Japan South Korea and New Zealand on 15 November 2020 inked a historic deal in Hanoi by creating the world’s largest goss domestic product GDP free-trade bloc. Most considerably, RCEP accounts for 30 percent of global GDP, having one-third productive global population. RCEP is larger than European Union and United States-Mexico-Canada Agreement (USMCA) in GDP terms. New Delhi is reluctant to capitalize massive opportunities being offered in RCEP in spheres of trade in goods, economic and technical cooperation, investment, intellectual property rights and dispute settlement.
Modi espouses Trump’s trajectory who withdrew the US from Trans-Pacific Partnership but he pulled India out of RCEP. Both belligerent leaders have a lot of similarities in anti-Chinese rhetoric too. Trump remained unsuccessful in addressing the US economic woes. He, therefore, was rejected for the second term in the US election. Keeping all eggs in the US basket proves to be detrimental for India. The US in May 2019 terminated Indian entitlement in the Generalized System of Preferences (GSP). In the same month, the US halted India from buying cheap oil from Iran imposed ban on Iranian oil. Modi needs to bring home the fact that international trade heralds the path to poverty alleviation, robust economic growth, improving living standard, enhancing overall economic development and productivity. The Asia-Pacific region currently has 2.023 billion middle-class population, having a considerable number of consumers and producers that can play a catalyst role in consolidation of Indian economy. His self-destructive policy of pulling India out of RCEP will close the door for economic growth, giving a lucid message to foreign investors that India is unfriendly country for foreign direct investment (FDI). Acceleration of economic growth without inclusive approach, foreign investment, regional integration and production technology will remain mere a pipe dream for India.
— The writer works at the Institute of Strategic Studies, a think-tank based in Islamabad.