Coronavirus: Area-specific lockdowns complicate India's economic recovery

Authorities in Kerala, India, are thinking of imposing a fresh lockdown after it recorded an increase of over 1,000 cases on July 22, 2020.
Authorities in Kerala, India, are thinking of imposing a fresh lockdown after it recorded an increase of over 1,000 cases on July 22, 2020.PHOTO: NYTIMES

As India struggles to bring coronavirus cases under control, city-or state-specific lockdowns have complicated economic recovery for the South Asian country, which at one point was the world's fastest growing economy.

Cities and states have been coming in and out of lockdowns as the local authorities rush to control the Covid-19 spread in the country, which is now the world's third most-affected, after the US and Brazil.

The central state of Bihar along with some north-eastern states such as Sikkim are among those currently under complete lockdown, with varying degrees of strictness.

The authorities in Kerala, an early success story, are thinking of imposing a fresh lockdown after the state recorded an increase of more than 1,000 cases on Wednesday.

Others are lifting lockdowns of anywhere from three to 10 days.

Life has been slowly returning to normal in IT hub Bengaluru, which reopened on Wednesday after a week-long lockdown that cost traders and industry 50 billion rupees (S$925 million), according to the Federation of Karnataka Chambers of Commerce and Industry.

The cessation of activity aside, uncertainty, more than anything else, is complicating recovery, said Mr Mahesh Vyas, managing director and chief executive of the Centre for Monitoring Indian Economy.

"The uncertainty associated with lockdowns being imposed today and removed tomorrow will have a direct impact on the recovery process because no enterprise can start operations without being sure of whether a lockdown is being imposed," said Mr Vyas.

"Many enterprises have people who come from a distance... who will be hesitant to come to work. Similarly, if a company produces goods, there is uncertainty of being able to deliver tomorrow or receive raw materials."

He added that India had seen a rebound since a countrywide lockdown was imposed by the federal government in March, bringing economic activity to a complete halt.

The lockdown has been lifted in stages since mid-May, with industries and businesses first reopening, followed by domestic flights and train services. Hotels, malls and restaurants too have opened.

 
 
 
 

"The worst (economic distress) was in April and May. There was a rebound in June," said Mr Vyas, but he added that the economy seemed to be "stagnating" at that level.

India was facing a slowing economy and a problem of jobless growth even before the pandemic erupted and upended the global economy.

Growth had reached a six-year low of 4.7 per cent in the final quarter of last year.

India's economy is expected to contract between 5 per cent and 10 per cent this fiscal year, the poorest performance in nearly four decades, according to various assessments.

"Labour crisis, disrupted supply chains, closed international export market and risk aversion by banks to disburse credit to struggling corporate India, ensure we are still quite a few months away from early signs of revival in the Indian economy," said Mr Rishi Sahai, managing director of Cogence Advisers.

"With a fiscal deficit already ballooning to 5 per cent of gross domestic product in the current year, the government of India has little headroom left to fund a bailout through tax and fiscal incentives."

Still, the federal government has maintained that small signs of revival are apparent with predictions that growth would pick up next year.

 
A version of this article appeared in the print edition of The Straits Times on July 24, 2020, with the headline 'Area-specific lockdowns complicate India's economic recovery'. Print Edition | Subscribe