Market

India’s Covid-19 Tragedy Is Now The World’s Problem

Narendra Modi’s “India First” mantra is becoming reality in at least one way: his nation is now first in Covid-19 infections.

Though the U.S. officially has more cases, Prime Minister Modi’s nation just grabbed the record no one wanted: the biggest single-day increase in infections—more than 314,000. And it’s no aberration. The second-most populous nation is now averaging more than 200,000 new cases per day—three months after Modi declared victory over the pandemic.

This is a five-alarm problem for the global economy on two levels. Progress against pandemics is only as convincing as the weakest links. Sadly, India is a ginormous link in terms of population and locale at the very core of South Asia. It also means Asia’s No. 3 economy is about to crater growth-wise, depriving the region of another engine for recovery.

“The pandemic is worsening a number of pre-existing trends,” says economist Tom Miller of Gavekal Research.

A sketchy public health system and weak Covid-19 testing protocols are the most obvious underlying condition now wrecking India’s 2021. But Miller also points to Modi’s failures since 2014 to narrow the gap between his soaring rhetoric about structural reforms to increase jobs, wages and competitive and quantifiable action. Indians are now paying the price as examples abound for the ways Modi didn’t turn talk into reality.

One is India’s failure to create manufacturing jobs,” Miller says. “Currently, the sector employs only 30 million Indians, 8 million fewer than a year ago. But these job losses are not just a consequence of lockdown: in 2016, more than 50 million Indians worked in manufacturing.”

Damning numbers that expose the hollowness of Modi’s constant declarations that India is raising game and moving upmarket into higher-value-added industries. Or just that India is making progress toward someday beating the middle-income trap.

That dreaded predicament tends to see developing economies stall out near the $10,000 per-capita income level. It’s currently below the $2,200 mark in nominal terms versus China’s $10,200 on World Bank’s league tables. Now, though, India will be lucky to return to 2019 income levels anytime soon—never mind the five-fold jump it needs to catch Xi Jinping’s economy.

Modi’s vaccination stumbles don’t inspire optimism. Like New Delhi’s big reform rhetoric, “India’s massive vaccination drive appears to be faltering, too,” says economist Prakash Sakpal at Dutch bank ING. “This leaves a strong political will and public awareness as the best hope. But that won’t spare the economy from a rough ride ahead amid ongoing macro-policy paralysis.”

Especially since there really is no such political will, and it’s a sadly familiar problem. When you look at the populists of our day, the one challenge they can’t swat away as “fake news” is a deadly pandemic. Until recently, leaders on the Jair Bolsonaro, Rodrigo Duterte, Donald Trump, Modi continuum had remarkable success blaming their failures on others.

Covid-19 is the immovable object around which these seemingly unstoppable forces can’t navigate. The only good news for Brazilian President Bolsonaro is that India is now the weakest link. The good news for former President Trump is that successor Joe Biden is cleaning up his mess—on track for 200 million vaccinations in arms before the end of his first-100-day window.

Philippine President Duterte, meantime, is juggling a good news/bad news narrative. Somehow, he’s still remarkably popular for a leader far more in league with Modi’s botched Covid response than success cases like South Korea and Taiwan.

India’s biggest long-term problem may be how the coronavirus crisis morphs its so-called “demographic dividend” into an economic nightmare. As Gavekal’s Miller notes, India’s adult population—aged 15 and over—swells “well over” 15 million every year, meaning that “India badly needs to create new jobs.”

Estimates are that India needs to create between 8 million and 12 million jobs per year just to keep up with people entering the labor market. “An influx of youthful workers should be an economic boon in a well-functioning economy,” Miller says. “Yet, paradoxically, India’s growing population has not boosted the labor force,” as defined by the number of people either working work or looking for it. Covid is exacerbating the problem.

At the beginning of 2020, Miller says, India’s labor force numbered some 440 million people. By March, it had fallen to 425 million. Bottom line: as many young Indians struggle to find gainful employment, many have simply stopped looking.

Covid-related disruptions will, in turn, exacerbate India’s biggest challenges: reducing chronic government inefficiency; narrowing inequality; clearing bank balance sheets of bad loans; improving infrastructure; increasing productivity; attracting more foreign direct investment; producing enough good-paying jobs to avoid social instability.

Being first in Covid is clearly not where Modi thought India would be in 2021. Yet unless New Delhi gets serious about addressing public and economic health alike, the world will shift to worrying where India might find itself in 2031. Modi must act fast to get India’s giant economy back on track.

Most Related Links :
reporterwings Governmental News Finance News

Source link

Back to top button