It would be an understatement to say that the Indian Economy finds itself in a rut. Right from the precipitous drop in the GDP or the Gross Domestic Product, to the steep fall in the economic indices such as:
- The Manufacturing IIP (Index of Industrial Production) which came in at any abysmal 3.2% for October 2021, raising fears of a prolonged slump
- Consumer Confidence Index which again shows that the uptick in consumer demand is limited and only boosted by the festival season, as well as the growth in the demand of the upper income categories, that bodes ill for the economy since without corresponding increase in rural and lower income class demand, no real recovery can take place
- Surprisingly, Retail and Wholesale Inflation continues to be high, which indicates an economy in stagflation or stagnated growth and high inflation, that is again a sign of all round depression in the economy.
- Moreover, the much hyped and celebrated “growth” in GDP of 9% is to be seen in the context of a negative growth rate for last fiscal, which “boosts” subsequent rises, and gives an “artificial” illusion of recovery.
So, how did the Indian Economy get to this stage? To start with, growth has been tapering off since 2016, and the subsequent Demonetization and rollout of GST or the Goods and Sales Tax, only made matters worse. As I explain in this article, The Indian Economy Went From Bad to Worse, and it would take a Miracle for it to recover.
The COVID Pandemic was the “last straw” for an already ailing economy and can be thought to The Next Shoe to Drop as far as the converging crises due to the pandemic are concerned. Worse, the impact of this “depression” have been felt by the middle and the lower classes far more than how the rich and the super rich were impacted. Indeed, this is the reason The Common Person Feels So Screwed, with the Millions of job losses and the loss of livelihoods hitting workers in the informal economy (latest figures show that the Informal Economy has shrunk by half) and the salaried class taking a hit too.
Of course, none of this is covered by the mainstream media, which only highlights the dizzying jumps in the stock markets and the headline GDP numbers, without contextualizing them. Indeed, statistics show a different tale as Real Wages have been Stagnating whereas, Markets have been Booming. Such disparities have been exacerbated by the onset of the pandemic which has worsened the anyway gross inequalities and inequities in the share of wealth and incomes, with the Top 10% of Indians now owning more than the next 50% combined
Given this situation, the spread of the Omicron variant is causing jitters to the populace, battered as they are by the Double Whammy of an Economic and Health Emergency. The reported Third Wave would nip the nascent recovery and possibly, knock the economy back into a prolonged downturn, unless all stakeholders start preparing for it by learning the lessons of the brutal Second Wave.
Of course, amidst all this doom and gloom, we can still salvage the situation through redistribution of wealth and putting the humongous resources to productive uses such as a Universal Basic Income Scheme built around a Centralized System of Aadhar based delivery. Indeed, this can be a game changer for Indians, reeling under the impact of shrinking incomes and lack of jobs, wherein a UBI on top of the existing Job Guarantee schemes can supplement the meager wages and complement other welfare schemes run by the government.
A sure shot way of pumping in more money into the economy by the private sector would be to open up and let foreign capital create jobs and growth. However, as is moot with many nations worldwide, India is Turning Inward and Betting on Self Reliance, which corresponds to the Deglobalization due to the pandemic shutting down global supply chains and restricted air travel and other features of a globalized economy unavailable to limit the spread of what was essentially a health crisis caused due to globalization.
The Atmanirbhar approach makes sense if it is matched by a Smart Globalization, or a Glocal method of harnessing global forces to local needs which is something that many foreign firms in India have been doing ever since the Indian Economy was liberalized. Indeed, this is the so-called Third Way wherein, to paraphrase Gandhi, we do not “shut our doors” and at the same time, are not swept away by the winds of different countries blowing towards us. In other words, being global and being self reliant need not be exclusionary and can be made to work together for the common good of the nation.
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