India’s stricken countryside threatens to undermine recovery

India’s financial markets have seen a strong recovery from the downturn caused by the devastating second wave of coronavirus in the country, with stocks approaching all-time highs.

But outside of cities, rural families are still rearranging their lives together again even as public health officials warn that a third wave is looming.

“You may see Address numbers “I will be back, but that doesn’t mean all is well,” said Dharmakirti Joshi, chief economist at CRISIL, a credit rating agency.

The shocking human cost of India’s Covid wave last month was revealed by drone footage that showed hundreds of shallow graves along the sacred Ganges.

Although acceleration pay vaccinations, analysts warn that the disaster is weighing on India’s economic prospects as well, weakening Consumer demand Policymakers hope to revive growth.

“The population is traumatizedsaid Jahangir Aziz, head of emerging market economics at JPMorgan. “All investment plans – all permanent consumption plans” will be deferred.

Until the emergence of the delta variable, which Indian scientists first discovered in rural Maharashtra in February, the Indian economy had been expected to record double-digit growth after a 7.3 per cent contraction last year.

But the second wave pushed the Reserve Bank of India’s consumer confidence index to an all-time low of 48.5, down from 84 before the pandemic. Since April 1, the virus is known to have infected about 18 million people and claimed at least 232,000 lives. Analysts suspect that real score much higher.

The Reserve Bank of India recently lowered its estimate of GDP growth for this year to 9.5 per cent, down from 10.5 per cent. JPMorgan expects India to grow by just 9 percent, which Aziz said would make the economy about 10 percent smaller than projected pre-pandemic levels.

“Anyone who is addicted to the global market will do well,” he said. But Indian consumption, Indian investment, and Indian small businesses will be hit at a level one would hardly even imagine. Far from the basics, people will be Very cautious about purchasing.

India’s workers were hit hard last year when 100 million jobs evaporated overnight under a strict lockdown, triggering a mass exodus to the countryside. By late 2020, an estimated 15 million former urban workers were still unemployed, while those with jobs were earning less than before, according to a study by Azim Premji University.

strong performance in Agriculture, which grew 3.6 percent last year thanks to abundant monsoon rains, and massive government spending on rural business plans, which helped cushion the blow.

Villagers in Uttar Pradesh
Villagers in Uttar Pradesh attend a meeting. Fear and mistrust have hampered vaccination efforts, particularly in rural areas, where two-thirds of India’s population lives. © Rajesh Kumar Singh / AP

But in a country where patients pay nearly 70 percent of health spending themselves, the Covid-19 surge has forced millions of families to tap into savings, sell assets or borrow to treat sick loved ones.

This shock could dampen consumer morale for months, especially among middle-class and working families. “health expenses They eat into family budgets, especially poorer families,” Joshi said.

Shobnath Patel, a 38-year-old karate instructor, in rural Uttar Pradesh, said his family has struggled since the pandemic forced his classes to be canceled, two of his nephews lost their jobs in the car industry and his brother’s house painting business collapsed.

When his older brother contracted Covid in April, the family exhausted their savings of 80,000 rupees ($1,080) on an ambulance to the nearby city of Varanasi, doctors’ fees, oxygen cylinders, medicines and hospital bills in a failed attempt to save. for him.

Shobnath Patel
Shobhnath Patel had to cancel karate lessons. His family then spent Rs 80,000 savings on medical bills in a failed attempt to save his covid-affected brother.

Other families in the village of Patel, Paterua, have suffered similar setbacks, with the virus infecting at least one member of each household and killing about 12 people.

“The economic situation for most people is going through a very delicate phase,” Patel told the Financial Times. “A lot of people have spent a lot of money on treating family members. Marriages, plans to build a house or any of those big things have to be postponed. Every family has suffered.”

After the outbreak of the second wave, many Indians seem to be resigned to the inevitability of the third wave, which will also affect demand. “There is a tremendous amount of uncertainty,” Joshi said. “No one can predict how severe the next wave will be.”

India has so far provided 315 million doses of vaccine, or about 23 doses per 100 people, well below the threshold for safe economic reopening, despite the acceleration of vaccination. But, as JP Morgan’s Aziz notes, “any increase in mobility risks re-igniting another wave.”

Pessimism is not universal. Saurabh Mukherjea, founder of Marcellus Investment Managers, said “business is recovering rapidly” as restrictions ease, while concern about public transportation, along with cheap financing, is fueling demand for cars and motorcycles. “No one wants to take public transportation,” he said.

But he acknowledged that the sustainability of any recovery in consumer demand depends on the course of the virus. “If we go towards the third wave again, we will go back into stagnation.”

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