The new variant is likely to hamper the economy recovery facilitated by the growing demand following boost in consumption. Consumption lifts demand and spending. It leads to with more and more production of goods and services generating employment and income. As such, growth is fast and inclusive.
Modi govt's effort to boost consumption through government spending and low interest rates has paid off, but with the emergence of new Coronavirus variant the fast recovery could be threatned. Gross domestic product as of now is seen expanding at 9.3% in this fiscal year ending March, according to a Bloomberg survey of economists. It is faster than the 9.2% forecast last month.
GDP in the July-September quarter grew 8.3% from a year ago, according to the median estimate in a Bloomberg survey. Though it is slower than 20.1% growth in the previous quarter but is a fourth straight quarter of expansion.
Undoubtedly, faster vaccinations and a decline in corona cases, have led to a pick up in the economic activities. From the service sector to manufacturing, and robust exports to rising tax collections, all are showing signs of strength.
Agriculture, is seen keeping the growth momentum after a normal monsoon this year. Despite farmers' long protest, it was the only bright spot amid Coronavirus ravaging the economy. It is still seen as the brightest spot. Hats off to our farmers. Brave farmers keep on toiling hard, pandemic or no pandemic.
However, the rising input costs due to supply generated disruptions and global commodity prices squeezing margins of companies are seen as black spots. Rising cost dampened the recovery in some sectors such as automobiles, particularly sale of two-wheelers-an indicator of rural demand. Soaring fertilizer prices are also adding to the risks of lower harvests.
Economists fear that the “broad based improvement in underlying economic activity,” could be threatened by the spread of Omicron. It “remains a big risk”.
Remember the first wave of the pandemic had sent 32 million people in India from the middle class (earning from Rs 2500 to Rs 700 daily) into poverty, according to the Pew Research Center. It accounted for a majority of the 54 million slipping out of the middle class worldwide.The high disease burden and the death rate in the second wave of the COVID-19 pandemic had hit the middle class more hard.
The Indian middle class was estimated to be 150 million before the outbreak of the first Coronavirus wave as per Research Paper of Panjab University. However, those in government jobs or are government pensioners or are working in big private sector business houses or retired from the private sector with good future security schemes were not as severely affected. On the contrary, they felt relieved as they were saved from going to offices/ workplaces. It resulted in 20-30% savings on transport & travel, outside eating and outings etc. No wonder, this class has financially prospered during the pandemic. This section comprises 30% of the total middle class.
Second section comprising small shopkeepers, working in service sectors like transport, catering, hospitality, entertainment;self employed like architect, CA etc, teachers in private schools & colleges, running coaching centers etc.was affected more severely. Two waves of the virus left this section most vulnerable as it experienced great financial stress due to the restrictions and lockdowns.
The centre for monitoring Indian economy had estimated that over 1 crore Indians were rendered jobless during second wave of the pandemic and the unemployment rate had touched a 12-month high of nearly 12 per cent. In a way job loss in the second wave is even higher than the first wave. This section was affected even more severely than the lower class as the latter continues to get government help in one way or the other like free ration and monthly funds transfers. In India , a minimum assured pension of Rs.3000 per month is given to all small shopkeepers and retail traders. This section is the BJP long-time solid vote bank.
It is this second class which bore the brunt of two Coronavirus waves. With repeated lockdowns and closures, their earnings had completely dried up, the expenses in the form of family running cost, fee of school and college going children, rents, electricity bills, EMIs etc kept on piling. With the result, apart from financial stress, they went into mental as well as physical stress too. They slogged for years to graduate from the lower to middle class but these two waves of Coronavirus pushed one third of them back to the lower class with earnings less than Rs 700 per day. The pandemic had knocked about 3.2 crore Indians out of the middle class in 2020, estimated Pew Research Center.
Most unfortunate is the union government or the state governments did not help this vulnerable and hard hit middle class. Reason, they are not organized and have no platform to collectively bargain for their benefits and as such doesn't constitute a decisive vote bank. In India, political parties including ruling one care only for those who constitute their vote banks,
As new variant Omicron is seen more contagious and deadly than the earlier one, Indian middle class is again at great risk and again could push this section into poverty. If this happens, this section, definitely, will need govt help.
(Chander Sharma)
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