Recession looms

The coronavirus pandemic and the consequent lockdown have already taken a heavy toll on lives and livelihoods worldwide, even in the most developed countries. The situation is set to go from bad to worse, with the World Bank foreseeing that global economy will shrink by 5.2 per cent this financial year — the worst recession since World War II. David Malpass, president of the US-based multilateral lender, fears that many emerging markets and developing countries will find it tougher to achieve a financial turnaround as a considerable share of their employment is in the informal sector. Thus, the economic prospects are very bleak for India, the new hotspot of Covid-19 along with Russia and Brazil. According to the World Bank, Indian economy will contract by 3.2 per cent in 2020-21 — Goldman Sachs’ forecast for the contraction is as high as 5 per cent — even as a stringent lockdown that lasted over two months and took away crores of jobs has, for all practical purposes, come to an end.

It is estimated that there are over 60 crore migrants in the country, of which nearly 25 per cent are in the major cities. Most of them have been rendered jobless, and their re-employment is a Herculean task. The government is banking too heavily on MGNREGA, which caters to the poorest of the poor. There are over 13 crore job card holders under this scheme, of which about two-thirds are active. The inadequate coverage shows that giving a fillip to MGNREGA is not enough to revive the economy.

The industry needs a major push to stimulate domestic demand and supply. Easing the loan facility alone won’t bail out the Micro, Small and Medium Enterprise sector, which employs 11-12 crore people and contributes around 30 per cent to the GDP. Lack of demand is as big a constraint as the monetary crunch for many of these units. Putting cash into the hands of the people is a good way to spur consumption. The unlocking process, though hazardous from the public health perspective, will prove to be justified and well-timed if the consumers’ purchasing power is restored.