How long did India's per capita GDP take to recover after 1918 pandemic?

The OECD recently said the world hasn't seen such an economic crisis in a century

The Paris-based Organisation for Economic Co-operation & Development (OECD) called the current economic crisis the worst peacetime situation in a century earlier this week.

It was 102 years ago that the influenza epidemic (more popularly called Spanish Flu) hit India. India’s per capita Gross Domestic Product had taken four years to recover from that crisis, reveal the numbers of the period, based on the Maddison Project Database 2018.

India's real GDP per capita (in 2011; US dollar equivalent), was $1,410 in 1917. It fell to $1,234 in 1918 as Spanish Flu began to spread across the country. The per capita income exceeded the 1917 level only in 1922, when it touched $1,447.  

The numbers are based on the work by economist Angus Maddison, whose database allows historical comparisons across countries. The 2018 database is based on the work done by Jutta Bolt, Robert Inklaar, Herman de Jong, and Jan Luiten van Zanden. The per capita GDP measures economic output relative to the population.

The OECD in its Economic Outlook released on June 10 noted that the virus could continue to recede, though it did not rule out a second wave. Economic activity would take time to rebound in either scenario, noted OECD Chief Economist Laurence Boone in the outlook.

“By the end of 2021, the loss of income exceeds that of any previous recession over the last 100 years outside wartime, with dire and long-lasting consequences for people, firms, and governments,” it said.  

India took years to regain its per capita GDP number even though the country’s population had taken a major hit because of Spanish Flu. The pre-Independence India accounted for 42 per cent of global deaths because of the disease.  Around 5.22 per cent of the population died because of the pandemic between 1918-20, according to a study published by the National Bureau Of Economic Research in April 2020. The paper — The Coronavirus and the Great Influenza Pandemic: Lessons from the “Spanish Flu” for the Coronavirus's Potential Effects on Mortality and Economic Activity — was authored by Robert J Barro, José F. Ursúa, and Joanna Weng.

The paper looked at the economic impact of deaths due to the First World War (WWI) and the flu pandemic.

“Regressions with annual information on flu deaths 1918-1920 and war deaths during WWI imply flu-generated economic declines for GDP and consumption in the typical country of 6 and 8 per cent, respectively. There is also some evidence that higher flu death rates decreased realised real returns on stocks and, especially, on short-term government bills,” it stated.  

Sreejith Balasubramanian, economist-fund management, IDFC Asset Management Company, said there would be 5-6 per cent contraction in the current financial year, ending in March 2021 (FY21). 

The existing balance-sheet issues of corporates, financial institutions, households, and the public sector mean a quick recovery would be a challenging task, though the annual growth rate for the next year would appear higher partly because of this year's contraction. “There is a base effect in FY22,” he said.  

The extent of the hit on potential growth would be the key, he said.