COVID-19 could cost India almost 135 million jobs and about 120 million people might be pushed back into poverty in India, as per a report by international management consulting firm Arthur D Little. The report titled "India: Surmounting the economic challenges posed by COVID-19: A 10-point program to revive and power India's post-COVID economy" stated that the worst of COVID-19's impact will be felt by India's most vulnerable in terms of job loss, poverty increase and reduced per-capita income, which in turn will result in a steep decline in the GDP.
"Given the continued rise of COVID-19 cases, we believe that a W-shaped recovery is the most likely scenario for India. This implies a GDP contraction of 10.8 percent in FY 2020-21 and GDP growth of 0.8 percent in FY 2021-22," the report said.
The report added that the 'collateral damage' of the forecasted GDP slowdown, will be felt most acutely in employment, poverty alleviation, per-capita income, and overall nominal GDP.
"Unemployment may rise to 35 percent from 7.6 percent resulting in 136 million jobs lost and a total of 174 million unemployed. Poverty alleviation will receive a set-back, significantly changing the fortunes of many, putting 120 million people into poverty and 40 million into abject poverty," the report said.
As per Barnik Chitran Maitra, lead author of the report and Managing Partner & CEO of Arthur D Little, India and South Asia, India is headed towards a W-shaped economic recovery with a potential GDP contraction of 10.8 percent in FY21. An opportunity loss of USD 1 trillion is staring India in its face.
While the report lauded the steps taken by the government and the Reserve Bank of India but said a far more assertive approach may be required given the magnitude of the adverse economic output. It suggested a 10-point program to accelerate the recovery which includes strengthening the 'safety net' significantly for the most vulnerable, enable the survival of small and medium businesses, restarting the rural economy, and providing targeted assistance to at-risk sectors.
The report further stressed that the government should launch "Make in India 2.0" to capture global opportunities, build 'Modern India', accelerate Digital India and Innovation, strengthen global investment corridors with the US, UAE, Saudi Arabia, Japan, and the UK, debottleneck land and labor and transform banking and financial markets in a bid to secure a sustainable economic future for 1.3 billion Indians.
The report reiterates what has been the writing on the wall since long- for India to become a USD 5 Tn economy, a radical economic approach is needed, centered on an immediate stimulus and structural reforms. While PM’s 'Atma Nirbhar Bharat Abhiyan' is a good start to this new approach, but what’s needed immediately is addressing the concern of India's most vulnerable sections and steps aimed at directly reviving the rural economy.