Prime Minister Narendra Modi’s second term has been filled with challenges, foremost among them being the Covid-19 pandemic, which upended India’s economy, dragging growth into the negative, stoking both inflation and unemployment. Everyday Indians have suffered immense hardship, with successive waves of Covid-19 taking a toll on both lives and livelihoods. However, despite the suffering, Prime Minister Modi seems to have retained public support, be it for his handling of the pandemic or economic management. Though optimization about his handling of the economy had dropped significantly in the previous MOTN (Mood of the Nation) survey in August, it has risen this time around. What seems to have worked in his favor are the slew of welfare schemes and policy measures that have, to some extent, addressed the pain in most sectors. The economy rebounded in the second quarter of 2021-22 as business activity returned to pre-Covid levels. However, with the arrival of the fast-spreading Omicron variant, business activity has once again come under a pall of gloom.
Graphics by Tanmoy Chakraborty
In the current MOTN poll, over half thesrated the NDA government’s handling of the economy as ‘outstanding’ or ‘good’. However, this is tempered by the fact that as many as 26.4 per cent rated it as ‘poor’ or ‘very poor’. Also, only 64 per cent of said their economic status had remained the same or improved since Narendra Modi took charge as prime minister, down from the nearly 76 per cent that reported a status quo or economic improvement in August 2021.
Health workers take swab samples at Mumbai’s Chhatrapati Shivaji Maharaj Terminus on December 16; (Photo: PTI)
The survey was conducted in the backdrop of some persistent economic problems—for one, India’s benchmark inflation rate, measured by the CPI (consumer price index), rose to 5.59 per cent in December 2021, the highest in five months. The country’s unemployment rate was at a four-month high in December, at 7.91 per cent, up from 7 per cent and 7.75 per cent in November and October, according to data from CMIE (Centre for Monitoring Indian Economy). The urban unemployment rate rose to 9.3 per cent in December, while rural employment stood at 7.28 per cent, a significant rise from the 8.21 per cent and 6.44 per cent recorded in November. The pandemic continues to hurt the services sector, with curbs to control crowding denting firms in retail and hospitality.
67% of those aged 45-54 say the govt. has done enough to address Covid’s economic damage. Only 54% of those aged 25-34 agree
In terms of future, 31.1 per cent of expectations remain in said they saw the economy improving the next six months, while 21.9 per cent were of the opinion that it would the same. While 29.2 per cent said it would get worse this was down from the 32 per cent who said so in August 2021. On incomes, an overwhelming 30.1 per cent of were optimistic about their incomes improving, nearly double the 17 per cent in August . At the same time, 27.3 per cent believed their incomes would remain the same (down from 45 per cent in August), while 28.9 per cent expected their income to fall (down from 34 per cent).
However, amidst the optimization, there are also indicators that inflation has become a serious problem. A whopping 67.3 per cent of said and their current daily expenses had become difficult to manage compared to last year, while only 23.8 per cent said that their expenses were still manageable (despite having risen). Inflation has remained a concern through 2021, not just in India, but across the world. Increases in commodity prices have hurt the competitiveness of businesses, whether small, medium or large. Wholesale inflation remained in double-digit territory for most of 2021—at 13.56 per cent in December, 14.23 per cent in November and 13.83 per cent in October. According to a statement from the Union ministry of commerce and industry, the high inflation in December 2021 was primarily a result of price increases for mineral oils, basic metals, crude petroleum and natural gas and food products, among other goods. Although most firms got back to business in the second half of 2021 after Covid-induced restrictions were relaxed, the economic uncertainty has impacted hiring to a great degree, especially in contact-intensive sectors like hospitality and retail. According to CMIE, some six million salaried jobs were lost in November. As many as 45 per cent of said the unemployment situation in the country as ‘very serious’, though this was down from 59 per cent in August. Another 25.6 per cent said the situation was ‘somewhat serious’.
Graphics by Tanmoy Chakraborty
Shankar Chaudhary, 40, the owner of a garments business in Navi Mumbai, says the past two years have been the toughest he has seen in the two decades he has been in business. He says it is not just the restrictions that have caused trouble, but also the arbitrary manner in which they have been imposed. “There is no clarity as to when you can operate your shop,” he says. “After the festival season in November, business has not been good at all.” Many MSMEs (micro, small and medium enterprises) tell similar stories, as do retailers. To be sure, their plight is not as bad as it was during the first wave of the pandemic, when there was a complete shutdown for weeks altogether, or even during the second wave, when the Delta variant ravaged the country. But the Omicron wave, arriving just as things were beginning to get better, has created problems for many.
Graphics by Tanmoy Chakraborty
There is a realization among the general public that restrictions on movement and crowding help contain the spread of the virus. However, it is also true that such measures hurt businesses. As many as 52.8 per cent of those polled said restrictions helped contain the spread but impacted business activity. However, 22.3 per cent of those polled did not think that restrictions impacted livelihoods adversely. In fact, there are several businesses that have done well during the pandemic, such as those in the online space, including e-tailers and food aggregators. The successful IPOs (initial public offerings) from unicorn start-ups such as Zomato, Nykaa and Policybazaar are proof of this trend.
Graphics by Tanmoy Chakraborty
However, the story is quite different for physical stores. Night and weekend curfews have hit retail and hospitality hard. The latest MOTN numbers put the general plight of Indians in perspective: as many as 64.1 per cent of those polled said their incomes had fallen, while only 22.7 per cent said there was no change in their incomes. The situation is better compared to the previous three surveys where 85 per cent or more said their incomes had fallen, but that does not offer much consolation as uncertainties related to Covid still linger.
Notwithstanding the hardship, the MOTN poll indicates a general feeling that the government has done enough to counter the worst of the economic damage caused by Covid-19. A slew of measures from the Center and state governments, especially those targeted at the poor, the farmers and small businesses offered much relief, although one could argue that nothing is too much in a country like India, where the scale and magnitude of problems are always challenging. A report by SBI Research in early January said the Emergency Credit Line Guarantee Scheme (ECLGS) launched by the government in 2020 to provide relief to MSMEs impacted by the pandemic saved 1.35 million firms from going bankrupt and, consequently, 15 million jobs. This scheme was the biggest fiscal component of the Rs 20 lakh crore Aatmanirbhar Bharat Abhiyaan package announced by the Center in May 2020. However, anecdotal stories from MSMEs from across India still reveal immense distress—firms are grappling with weak demand, high absenteeism among workers due to Covid infections and narrowed profit margins due to rising material costs. But the extent of the pain is not easy to gauge without sufficient data. The Center has said it does not have data on MSMEs that were forced to close as a result of the pandemic. At the same time, measures aimed at the poor, including the PM Kisan scheme, have helped mitigate the suffering of those impacted most by the pandemic. As many as 59.7 per cent of those polled believed that the Center gave enough relief to those hit by the Covid crisis through funds and other measures, while 31.3 per cent did not think so.
77% of from the east say unemployment is a serious problem; 56% of those from the south agree 67% of those aged 45-54 say the govt. has done enough to address Covid’s economic damage. Only 54% of those aged 25-34 agree
While MSMEs struggled, several big businesses were able to stay afloat by pruning costs, especially on travel and remuneration. Such measures, alongside lower corporate taxes, meant better profitability for big businesses despite Covid-related disruptions. In fact, some of the biggest announcements of new projects came from a few large corporates, who also rode the commodity cycle boom. As many as 47.7 per cent of say that big businesses were the biggest beneficiaries of the NDA government’s economic policies, with only 7.6 per cent thinking that small businesses were helped the most. Significantly, only 11.6 per cent of those polled believe that farmers have benefited from the most of the Modi government’s economic policies. This comes against the backdrop of the stiff resistance from farmers against the farm reforms, which forced the Center to repel them last year. The unorganized sector, which bore the brunt of the pandemic, seem to have benefited the least, with just 7 per cent saying that daily wage earners have benefited the most from the government’s policies.
One of the government’s major attempted reforms in its second term has been its push to exit public sector enterprises. Though it announced a string of disinvestment proposals, including of Bharat Petroleum Corporation, Shipping Corporation of India and two PSU banks, the Center has not made much headway this financial year, and will miss its disinvestment target of Rs 1.75 lakh crore by a huge margin . The only relief was the sale of Air India to the Tata Group in October for Rs 18,000 crore, with the Tatas directly paying Rs 2,700 crore and the rest going toward the airline’s Rs 15,300 crore debt. But issues like privatisation and disinvestment are tricky. The sale of Air India has split public opinion down the middle—43 per cent of those polled said they did not support privatisation, while 41.4 per cent said they did. Equally strong views have not emerged in the area of cryptocurrencies, where the PM has highlighted the need for a concerted global regulatory effort. While 38.1 per cent of said they wanted the Center to ban cryptocurrencies, 34.3 per cent were unaware of the issue or did not have a strong view. The Center is currently discussing regulations with various stakeholders and is expected to legislate on the matter soon.
Graphics by Tanmoy Chakraborty
With the government going into election mode, politics is likely to take precedence over good economics. The Indian economy, though bruised, is on a recovery path. And though issues like inflation don’t always make headlines, they do determine the fate of governments. The clouds of the pandemic have not cleared, leaving businesses, policy makers and the general public guessing. India cannot lower its guard if it is to recover from the damage inflicted by Covid-19.
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