Owing to the series of lockdowns and phased unlock measures, Indian economy suffered an 8.6% GDP decrease in the September-end quarter and entered a technical recession for the first time in history. The COVID-19 pandemic forced the country to deal with an economy vs human life scales, which ended up in the latter’s favour. As 2020 nears its end, it is certain that COVID-19 will affect the Indian economy in 2021. The only question is, positively or negatively?
Signs of worry
S&P Projects, Goldman Sachs, Moody and Fitch, and Asian Development Bank have projected an economic contraction between 9 to 11.5%. The global companies believe that the primary reasons behind the forecast include reduced private company investments, unavailability of urban-rural labour strength, and the resurgence of COVID cases across the country. For instance, an increase in purchase capacity among people has been constantly accompanied by rising COVID cases due to mismanagement.
S&P said, “One factor that presents potential upside to growth is the availability of a widely-distributed COVID vaccine earlier than our current estimate around mid-2021.” However, the distribution of Pfizer-BioNTech vaccine candidate in India looks bleak owing to the high cost per dose, storage issues, logistical hurdles, and its small reserved share in comparison to other countries. The only hope lies with AstraZeneca’s vaccine along with a miracle from Serum Institute of India or Bharat BioTech’s COVAXIN.
The Spring Effect of recovery
On the contrary, experts believe that resumption of economic activities and buying behaviour in India could imitate a spring effect. Morgan Stanley said that the Indian economy is expected to enter a ‘Goldilocks’ phase in 2021, which is usually characterized by a low unemployment rate, increase in purchase power, and policy measures that reduce the rate of interest to boost investments.
Furthermore, French Ambassador Emmanuel Lenain said that India will play a crucial role in the mass production of a vaccine for global distribution. Currently, it is the largest global manufacturer for generic drugs and vaccines due to its heavy manpower and large production facilities. Hence, even without its own vaccine candidate, India could enter in a quid pro quo situation with foreign countries. This could align with the government’s framework to distribute the vaccine to one crore frontline workers in the first phase while simultaneously keeping an eye out for the four vaccine candidates in advanced development stages.
That said, it is difficult to take a conclusive side with respect to COVID-19’s impact on the country in 2021. The Indian economy could enter an exponentially rising curve by the middle of next year or showcase stronger signs of recession.