The Post-Lockdown Scars

Context: Evidence of stress begin to appear even though economic indicators and tax receipts show an improvement.

Indicators suggesting an economic recovery

• Higher financial savings with upper-income households: This is evident from the fact that the revival of certain sectors pertaining to these households.

• E.g. luxury carmakers have had a strong October, and residential real-estate sales have picked up in the metros

• Improved loan collection efficacy:  Loan collection efficiency of financial firms has crossed 95 % due to improving business momentum.

• Improving tax revenues:

• Gross tax collection in August for the central government was 2 % higher than in August last year 
• 10 % growth in Goods and Services Tax (GST) collections September.
• Excise duty collections are growing since the duty per litre of petrol and diesel has nearly doubled.

Challenges to the economy

• Fewer Assets and Higher Debt: in the aftermath of the pandemic, among low-income households.

• Urban distress: E.g. more than 300 families depositing jewellery with a pawnbroker in Kandivali (north Mumbai) for a combined loan of Rs 70 lakh during the pandemic. 

• Income distress

• Job loss and reverse migration: An elevated demand for jobs under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) supports the fact.

• Drop-in private school enrolment: 

• According to the 2020 Annual Survey of Education Report (ASER), drop in the students enrolled denotes income distress for parents and teachers.

• Education was nearly 5% of total consumption in 2019 and a large source of formal and informal jobs. 

• Reduce tourism spending: the total spend by foreign travellers to India used to be nearly 1% of Gross Domestic Product (GDP). 

• Lack of direct interventions: in the form of direct funds to the poor and informal sector leading to leakages and misdirection of funds.

• Constraints in the financial sector: that was a bottleneck pre-pandemic, are likely to re-emerge in the next few quarters, and need to be addressed.

Conclusion: The pandemic has laid bare gaps in the toolkits of governments the world over, not just in India. At the same time, many transformational schemes have emerged out of responses to past crises.