THE BIG LEAP BACKWARD

India is one of the worst-hit economies among global majors. The ordeal can become an opportunity, but only if there is a fundamental overhaul of business processes

- M.G. ARUN

For most of January and February this year, Covid-19 seemed to be a largely Chinese problem, with few fears of the virus reaching Indian shores or directly impacting the domestic economy. Most worries at the time were about the effect on imports from China. However, the spread of the virus and the subsequent lockdowns have thrown India into its first recession since liberalisation, disrupted business and destroyed livelihoods.

The Indian economy’s fall from one of the world’s fastest-growing to one of the worst-performing large economies was fairly dramatic. One of the reasons for this was the fact that GDP growth had been slowing even before the virus arrived in India, falling to 4.1 per cent in the October-December 2019 quarter on a year-on-year basis. Infrastructure projects were stuck, consumer spending was low, exports were struggling, and the banking sector, which was expected to finance India’s growth to a $5 trillion economy by 2024, was saddled with a mountain of bad debt and tainted by scams and bank failures.

The lockdown severely aggravated the pain. At -23.9 per cent, India’s GDP growth in the first quarter of this fiscal was one of the worst among large economies, with consumption wiped out by the lockdowns first imposed by the Centre and then by state and local authorities. While the services sector was the worst hit— with the aviation, hospitality, travel and retail sectors in shambles—the manufacturing of non-essential commodities ground to a halt too. For the first time in India’s history, domestic automotive manufacturing came to a halt; in April, Maruti Suzuki, India’s biggest carmaker, sold no cars at all. India Inc resorted to massive job and salary cuts as companies struggled to stay profitable with sales under pressure.

ASHISH SIRSAT, 49