One year on

Ravages of last year's lockdown may still affect economy

A year ago, as India went into a national lockdown to control the initial spread of the Covid-19 virus, most in the country probably expected the crisis to last only weeks or months. Yet, one year on, the virus is still very much around. Indeed, some states —Maharashtra, in particular — are hitting yearly highs in terms of the number of new infections. Dealing with this wave of infections will be much more difficult than it was a year ago or even last autumn. The problem is not just that pandemic fatigue has set in among individuals, but also that the economy has only barely recovered from the damage dealt to it by the original, draconian lockdown. Governments are naturally averse to re-imposing any sort of stay at home orders for fear that the incipient recovery could be nipped in the bud.

The figures would appear to bolster a concern about the recovery. Overall, growth ticked up sharply in the second quarter of this fiscal year as compared to the lockdown-hit first. The third quarter, October-December, showed less of a quarter on quarter increase but gross domestic product was at least marginally higher than in the same quarter of the previous year. Although the year-on-year figures for growth in the next months will of course be excellent, given the low base, the government will nevertheless be wary since the economy is hardly back to its pre-pandemic solidity.

It is also unclear what the longer-lasting damage of the initial months of the pandemic and the lockdown might be. A recently reported survey conducted by the Delhi government towards the end of 2020 revealed that unemployment even at that late stage had remained extremely high. According to that survey, the unemployment rate in Delhi six months after the lockdown, in October and November of 2020, was about 28.5 per cent against a pre-pandemic level of around 11 per cent. This was in spite of the gradual resumption of activity prior to October. In the absence of clear and reliable high-frequency data about employment, livelihoods, and incomes, such surveys can be policymakers’ only guide. It is far from clear whether the number of people so negatively affected by the lockdown was in fact this high, how many more have found jobs as the economy returned even closer to normal in the months since December, and what can be done to help them. A year after the lockdown, which exposed the weaknesses of India’s much-vaunted new welfare systems, the government still has no reliable way of counting, identifying, and helping those most affected by the pandemic.

In the end, the only real medicine for both the economy and the pandemic is scaling up the vaccination effort even further. The government must work harder on, for example, increasing the manufacturing capacity of the Covaxin vaccine. The Russian Sputnik vaccine announced on Monday a tie-up with Virchow Group to make 200 million doses in India. The Indian production of the Johnson & Johnson vaccine, already being used on a large scale in the US, was discussed at the Quad leaders’ meeting recently. The government must prod the regulators into ensuring a compressed timeline is met for approvals of vaccines, and it should— like governments elsewhere — ensure that there is no excess capacity left in the industry, if necessary by brokering deals between pharma companies and manufacturers itself. A year into the pandemic, the only way out remains a widely available vaccine.