India’s Economy, Slammed by Covid-19, Needs Its Lost Growth

The lockdowns in 2021 were nowhere near as severe as the nationwide curbs last year, which pushed millions of people out of cities and into rural areas, often on foot because rail and other transportation had been suspended.

Throughout the second wave, core infrastructure projects across the country, which employ millions of domestic migrant workers, were exempted from restrictions. More than 15,000 miles of Indian highway projects, along with rail and city metro improvements, continued.

On Tuesday, Dr. Pant said India’s growth estimates of 20.1 percent for the April-through-June period were nothing but an “illusion.” Growth contracted so sharply around the same period last year, by a record 24 percent, that even double-digit gains this year would leave the economy behind where it was two years ago.

Economists say India needs to spend, even splurge, to unlock the full potential of its huge low-skilled work force. “There is a need for very simple primary health facilities, primary services to deliver nutrition to children,” Mr. Vyas said. “All these are highly labor intensive jobs, and these are government services largely.”

One of the reasons Indian governments typically have not spent in those areas, Mr. Vyas said, is that it has been considered “not a sexy thing to do.” Another is the governments’ “dogmatic fixation” with keeping fiscal deficits in control, he said. The government simply can’t rely on private sector alone for creating jobs, Mr. Vyas said.

The “only solution,” he said, is for the government to spend and spur private investment. “You have a de-motivated private sector because there isn’t enough demand. That’s what’s holding India back.”

Article source: https://www.nytimes.com/2021/08/31/business/economy/india-economy-covid.html