By – Aneek Tagore
Last year in the mid of March, India was hit by the deadly coronavirus which wrecked the major economies around the globe. Since then, India’s economy has seen a remarkable downfall until recent periods. According to the National Statistical Office (NSO) report, India registered a GDP growth of 0.4 %in the third quarter of 2020-21. Now, the very first question that comes to our mind is, “Is this good or bad for the economy?”. Generally, people treat GDP as the yardstick of how the economy of a nation performs. This is not the end of the story. We need to dig a little deeper to understand the importance of the above statement and how it is going to affect our daily lives.
Economic recovery is the business cycle stage following a recession, that is characterized by a sustained period of improving business activity. Normally, during an economic recovery, gross domestic product (GDP) grows, incomes rise, and unemployment falls as the economy rebounds.
Various capital letters such as V, U, L, etc. have been used in the past to describe the movement of the economy. Recently, there has been a new addition to the list, and the corresponding growth is termed as ‘K-Shaped Growth’.
WHAT IS K-SHAPED GROWTH?
Generally, this type of growth is seen immediately after a recession. If we look carefully at the letter ‘K’, it shows a rift between the sectors of the economy i.e., we see a part of the economy going up like the upper arm of the letter K and another part going down like the lower arm of K. For instance, during the pandemic, the tourism industry has gone downhill. On the other hand, various e-learning companies have flourished. K-shaped recovery is a unique case of growth that exposes the pre-existing gaps in the economy and aggravates those.
HOW HAS IT AFFECTED THE ECONOMY?
Concerning India, there has been a striking contrast in the plight of blue-collar workers, who had to migrate on foot to their native places while white-collar workers could work from the comforts of their homes. There has been a huge discrepancy in the impact of the pandemic and the lockdown even within the formal sector itself. For instance, while the e-commerce sector witnessed a 17% growth between February and June 2020, India’s hospitality sector dipped by 43.5% in terms of revenue per available room in the April-Oct period of 2020. Similarly, while fintech companies in India remain hopeful about their growth given the structural shift in consumer behavior towards online solutions. The aviation sector continues to function far below its pre-COVID levels due to the cap on operational capacity as well as the reluctance of travelers due to potential risks. The bifurcation and uneven recovery are also visible in labor unemployment across formal and informal sectors. Although India faced unprecedented levels of job loss during the lockdown, the unemployment levels have now almost returned to the pre-lockdown phase. However, India’s recovery in unemployment has not been equal for all, with vulnerable sections being left behind. Besides, these marginalized sections are often majorly employed in the informal sector, which leaves them even more vulnerable to economic downturns like the current crisis.
HOW HAS IT AFFECTED OUR DAILY LIVES?
Households are one of the important components of the economy. The people retaining their jobs during the pandemic increased their savings and we see a dip in consumption. The people who lost their jobs were forced to reduce consumption. The people with lots of money in hand invested in the stock market. As vaccines became reality, they began to buy stocks that would do well in an economic recovery.
WHO HAS FARED THE BEST IN 2020?
After the health guidelines were declared by WHO(World Health Organisation), there has been a huge demand for hand sanitizers and face masks in India. This helped the industry grow more and generate more revenue. As vaccines were manufactured and vaccination started, people started investing in the pharmaceutical industry.
- Information Technology (IT)
After the complete lockdown was declared all over the country, the employees of the government and private sector were compelled to work from home. This indirectly led to an increase in the sale of headphones and laptops etc. Apps like Zoom and Microsoft teams gained popularity.
Companies like Flipkart and Amazon saw a rise in sales during the covid period as consumers started shifting from conventional shopping(in-person purchases) to online mode.
- OTTs, Gaming, and Edu-Tech.
As Indians were stuck in their homes, they watched all sorts of movies, web shows, etc on Netflix, and other OTT platforms. In December, India had the highest viewership of films on Netflix globally. The youth of the country started playing PUBG for recreation. Half of the PUBG players were Indians.
- Home Fitness
This is comparatively a niche market that has evolved very much during the Covid times. Gyms were shut down and this led to the development of various home fitness apps and a rise in demand for indoor workout accessories.
WHO IS GETTING HIT THE HARDEST?
- Women Labourers
The global estimated income of 740 million women in the informal economy had fallen by 60% in the first month of the Covid-19 pandemic, according to a September 2020 report by UN Women.
Today, almost all MSMEs are out of action due to the lockdown, choking all production activities at major firms across sectors. Several reports indicate how MSMEs are reeling under crisis and have no money to pay their employees.
- Automobile Industry
With most of the plants shut, big automobile manufacturing companies have announced pay cuts and are waiting for a decision on the resumption of dealerships.
- Real Estate Sector
While construction activities have resumed in some areas, there are many hotspots in urban areas where key construction projects have been put on hold for several weeks due to this lockdown.
The K-shaped recovery is exposing the winners versus losers in every industry. Most of the companies that are now investing in digital capabilities are the ones that are emerging. These companies are accelerating their growth in this pandemic, whereas the organizations who have been a bit less proactive on that front are really feeling the pain in many cases. Goldman Sachs forecasted that India’s GDP to grow to 9.1% year-on-year in 2022 from 8% in 2021, following a sharp contraction of 7% in 2020, which was driven by.