India's GDP is likely to rebound to 8.5% in 2022, S&P says
- India's gross domestic product may rebound to 8.5% in 2022 before suffering a "deep contraction" in this fiscal year, according to S&P Global Ratings.
- Despite India's $264 billion (R4 trillion) economic stimulus, or about 10% of its GDP, the country's migrant labourers and struggling communities are enduring critical troubles.
- A direct cash-transfer benefit reform enabled Prime Minister Narendra Modi's government to deliver stimulus funds to the needy, but tens of thousands amongst those deprived do not have access to digital payments accounts.
- Meanwhile, a forgotten social community has been wiped off of India's population data and has failed to secure a government representative on the presumption that their numbers have dwindled to a mere 296.
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India's economy is likely to rebound by 8.5% in 2022 after suffering a deep contraction in the current fiscal year, according to S&P Global.
However, the world's fifth-largest economy is faced with both a migrant crisis of epic proportions and community distress as tens of thousands struggle to persevere during the pandemic in one of the world's most populous nations.
The credit ratings agency affirmed a "BBB-" rating on India which represents a relatively low-risk investment and held its "stable" outlook.
Real gross domestic product will shrink 5% by the end of fiscal 2021, S&P said. In 2020, GDP fell to an 11-year low of less than 5%.
Aspects that will support India's economic rebound include the country's "wide range of structural trends, including healthy demographics and competitive unit labour costs," S&P said. If implemented efficiently, economic reforms could support the rebound.
On the other hand, India's recovery could be hampered by "a serious local epidemic, enduring financial and corporate distress in India, and long-lasting global economic malaise."
A sharp rise in national debt is expected this year as the government reels out more stimulus to address the pandemic while dealing with weak revenue generation, but S&P expects its fiscal position to return once a global recovery stabilises.
Focus on containment and mitigation
In May 2020, the Indian government announced a $264 billion (R4 trilion) stimulus package. Out of that, S&P said direct government spending will be less than 1% of GDP, while maximum relief will be directed by India's banking sector through loan guarantees and credit support.
S&P expects India's trade position to remain unchanged in the next 12 months as the economy sees a collapse in exports, a steep fall in the central bank's foreign exchange reserves, and a sustained rise in the current account deficit.
A direct benefit transfer reform enabled Prime Minister Narendra Modi's government to deliver stimulus funds to over 300 million at-risk individuals, but many more still struggle to avail of the benefits.
Particularly so for migrant labourers who do not own digital payments accounts. Many villagers who migrated to cities for higher-paid jobs were forced to travel back home to rural areas once the nationwide lockdown rendered their daily jobs redundant.
More recent governmental measures are aimed at supporting non-bank financial institutions and small-and-medium enterprises, S&P has said.
- Social conditions dependent on labour markets
S&P says prominent incidents of social unrest related to "high-profile legislative decisions" in the past two years have not "materially" dented support for the ruling national political party.
Labourers in the economy live and work in dense networks of people. For this reason, the government has addressed the threat of a widespread outbreak amongst these workers, but even if that's achieved, S&P says both the informal and formal labour markets will find it arduous to restore swiftly.
S&P projects that if unemployment remains elevated for a long time, "pockets of social unrest could emerge" and dampen India's investment and growth.
Crises persist for a social community left in the lurch
In another troubling sign for India's employment numbers, one considerably-large social group in the country is noticeably unidentifiable on its population data: the Anglo-Indian community.
With its distinct line of ancestry built during the time of colonial rule, the minority Anglo community is eliminated on paper and stripped of its identity within India's demographics.
A sizable number of Anglos in North East India have been significant contributors to the oil, railways, and tea industries of the region. They also helped set up well-recognised academic institutions across the country.
Over the decades, those who could afford to migrate to other countries did so and left behind thin numbers, leading to an almost hidden presence.
Consequently, many remain homeless and rely on sundry charity for survival. A lack of government attention has made Anglo families perish.
To make sure the community did not suffer harsh neglect post-independence, the government made a provision to nominate two members of the Anglo community to parliament. That came to an end in January 2020.
- Lack of political representation for the lost group
Representing a mix of British and Indian heritage, the Anglo Indians no longer have a government representative on the assumption that their numbers have dwindled to a mere 296.
Owing to their geographic dispersion all over the country and since the community has never been counted separately under the census, no one is certain of the true number. A plea to count members of the Anglo community separately was earlier made, and ignored by a bureaucratic quirk.
Census information is handy for when governments and health providers need to trace people that require help when disasters such as the coronavirus hit the economy.
Anglo-Indian families have been uprooted and are left out of the "New India," according to Geoffrey Farnham, a member of a local Anglo community group in north-east India. Relief meant for welfare and upliftment never reached their community in the north-east region, he said.
Their alienation by the central government is so complete, that members of the Anglo community in the North East had no idea they had political representation at all, said Farnham, whose grandfather fought in the 1916 Battle of the Somme as a major in the British Army.
Although a bill for the extension of political representation exists, the plea has been held off on grounds of other pressing matters to be dealt with.
With the pandemic still in the early stages, the scale and duration of the crisis remain uncertain, S&P said. Similarly, India's social, health, and economic progress is unpredictable.
If containment measures against the virus prove successful, the country could solidify its political and social stability, according to the ratings agency.
"In our view, India's economic outlook remains bright, so long as emerging weaknesses are addressed before growth rates fall much further," Andrew Wood, director of S&P's Asia Pacific sovereign ratings said.
"The course of India's pandemic will play an important role in determining the strength of its economic recovery."
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