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International

India suffers worst economic decline since independence

India’s already suffering economy has gained more years due to pandemic and the great lockdown.

As per the official data showed on Monday, India’s economy contracted 7.3 percent in 2020-21 which is easily its worst recession since independence as coronavirus lockdowns leave millions unemployed.

Between January and March, Asia’s third-largest economy grew by 1.6pc after exiting its first “technical recession” since 1947 following two successive quarters of contraction.

Bangalore’s Azim Premji University defines the poor as those living on less than 375 Indian rupees ($5) a day. The university’s study shows that about 230 million Indians fell into poverty due to the pandemic last year.

Easing restrictions towards the end of 2020 helped propel a temporary recovery in activity but it was short lived.

The Centre for Monitoring the Indian Economy said that India’s vicious second wave saw 7.3m people lose their jobs in April alone.

It clearly shows the lack of safety net with million unqualified for emergency government rations.

Prime Minister Narendra Modi’s government has so far refrained from announcing any fresh major stimulus measures in response.

Nobel prize-winning economists Esther Duflo and Abhijit Banerjee criticized the government for focusing on loans to hard-hit businesses rather than direct cash handouts to vulnerable households.

In a recent report, British financial services firm Barclays pegged the economic cost of India’s second wave at $74 billion, or 2.4pc of GDP.

India’s central bank is projecting annual growth of 10.5pc and the International Monetary Fund 12.5pc, the fastest among major economies.

“We expect 10 percent GDP growth in FY22, with a slight downside bias.”

Upasna Bhardwaj, Senior Economist at Kotak Mahindra Bank said.

But she warned that analysts would “have to revisit this expectation much more often, given it depends on the pace of vaccinations and the pace of restrictions”.

“While the situation this year is not as bad as the national lockdown last year, the economy is coming under a lot of stress due to localized restrictions, which we expect to continue into the rest of the year.”

India’s economy was in the throes of a prolonged slowdown even before Covid-19 struck, but the pandemic affected years of gains.

An estimated 50m Indians were expected to climb out of poverty last year. But instead, the poorest 20pc of households lost their entire income in April and May as the business ground to a halt.

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