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Business EYE JUNE 11, 2021 | The Indian Eye 38

inDia aT crOssrOaDs:

sharpest contraction of economy by 7.3%

or booming economy?

Covid 2.0’s impact on the economy in the current financial year will be felt more through

loss of demand impulse than supply-side disruptions

Our Bureau in the last few years.

New Delhi But India Ratings and Re-
search (Ind-Ra) has said that
hat is the state of In- Covid 2.0’s impact on the econ-
dian economy? If you omy in the current financial year
Wstick with the Indian will be felt more through loss
government’s version, the econ- of demand impulse than sup-
omy will grow 10.5% in the fiscal ply-side disruptions.
year that started on April 1. But Besides, the loss of de-
on Tuesday State Bank of India mand-side impulse is expected
- the country’s largest lender - to be more pronounced in rural
slashed its growth forecast to areas than in urban areas, not-
7.9% from 10.4%. Several inter- withstanding the forecast of a
national banks such as Barclays near-normal monsoon this year.
and UBS have also cut back The rural areas were saved by timely arrangements made by state govern- Covid 1.0 was largely an urban
their predictions. ments had put up to quarantine migrant labors before letting them enter phenomenon despite the large-
After a 7.3% contraction in their homes and intermingle with the local population scale reverse labor migration.
2020-21, the sharpest ever re- Ind-Ra said what saved rural
corded by India, the relatively tent reforms. prospects for the world econo- areas was timely arrangements
muted recovery puts India at In a pointed rebuttal to Chi- my have brightened but the re- state governments had put up
odds with countries like United dambaram’s remarks at a media covery is likely to remain uneven to quarantine migrant labors
States and China that are seeing interaction yesterday, Thakur and, crucially, dependent on the before letting them enter their
a swift rebound as they emerge said that consistent reforms and effectiveness of public health homes and intermingle with the
from the pandemic, and suggests strong fundamentals have en- measures and policy support. local population.
deeper damage has been done sured India had a swift rebound The report highlighted that in This prevented the spread
to an economy worth around from a contraction of 24.4 per many advanced economies more of Covid-19 in rural areas and
$2.9 trillion before the crisis hit. cent in the 1st quarter of FY 2020- and more people are being vac- production activities and in turn,
The situation has exacerbat- 21 to a growth of 1.6 per cent in cinated, government stimulus rural consumption largely re-
ed unemployment that touched the 4th quarter of FY 2020-21. is helping to boost demand and mained unimpacted.
a 12-month high of 11.9% in May “Indian economy is resilient and businesses are adapting better However, the situation in
from 7.97% in April, according will rebound in the times ahead to the restrictions to prevent the Covid 2.0 is different as the
to data from the Centre for Mon- based on consistent reforms that spread of the virus. highly infectious mutated strain
itoring Indian Economy. Rural have ensured strong fundamen- “But elsewhere, including in of Covid-19 has already spread
unemployment that normally tals through these difficult times. many emerging-market econo- to rural India. Health ministry
hovers around 6-7% also hit dou- I am not surprised that the For- mies where access to vaccines as statistics show that the country’s
ble digit levels in May, accord- mer Finance Minister chose to well as the scope for government 394 districts out of 718 had a
ing to the privately owned firm. ignore hard data and instead support are limited, the eco- case positivity rate of over 10 per
But the government is very went ahead with ‘whataboutery’ nomic recovery will be modest,” cent on May 20. Such a high rate
confident of growth. Hitting out - the Congress leadership has it said. of positivity rate is being record-
at former union minister P Chi- embodied this clueless approach India is one of the emerging ed even when the level of testing
dambaram for his criticism of over the years,” he said. countries. is low in rural India. This means
the government’s handling of The Organisation for Eco- However, the record For- that the pandemic in many areas
economy, Minister of State for nomic Co-operation and Devel- eign Direct Investment (FDI) may be spreading or has already
Finance Anurag Thakur said on opment (OECD) has revised up in India shows the confidence of spread without getting adequate-
Wednesday that the Congress its forecast for the 2021 global international investors in the In- ly captured in official statistics.
leader had ignored hard data GDP growth, predicting an in- dian economy. China is the man- Ind-Ra said this may result
and “instead went ahead with crease of 5.8 per cent. Accord- ufacturing factory of the world in inadequate government inter-
‘whataboutery’” and noted that ing to the OECD’s Economic but it is seen that many compa- vention to contain the pandemic
Indian economy will rebound in Outlook released on Monday nies have shifted out from China and higher fatality.
the times ahead based on consis-
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