The hardest yaers of Narendra Modi

In every single state, once the health emergency was overcome, thanks to the lockdown, the next urgency was to restart the economy. But in a dynamic that will last a long time – until the vaccine is found and distributed – if you have not brought the pandemic under control and circumscribed each new outbreak, a premature reopening allows the virus to return, forcing the economy to stop new.
It happened in many places in the world. Even in India. But here the problem is even more serious than elsewhere. When the World Bank created the definition of “new poors”, to indicate the social cost of the virus, its economic victims, he was thinking mainly of India. Due to a growth that remained far from the percentages of the recent past, even before the pandemic about half of the Indians, that is 650 million people, lived dangerously close to the poverty line. In the Subcontinent there are three levels: that of extreme poverty, $ 1.90 a day; those from 3.20 and 5.50 dollars per day. The Indians who already live in these three groups of poverty are between 230 and 380 million.

Announcing a new economic package, Prime Minister Narendra Modi launched his umpteenth slogan on May 15; “Atma Nirbhar Bharat”, the self-sufficient nation. Like any other country, India also revised its expectations of globalization. But Atma Nirbhar does not intend to boycott products and even less international investments: it is only an attempt to encourage internal market and production in an extraordinary era like this.
However, a few weeks after the effects of a premature return to normal following a lockdown and social distancing difficult to guarantee in a country like this, the virus has dangerously returned. With over 674 thousand cases, in the first days of July, India became the third country in the world by number of infections after the United States and Brazil. The most affected states are the most important for industry, finance and commerce in the country: Maharashtra, Delhi, Gujarat, Tamil Nadu. The government was forced to reimpose some regional lockdowns, stopping several economic activities again.
The main risk for India’s growth is the continued spread of the pandemic because the health crisis has not yet been contained. Further outbreaks may require other closures. Such a result could curb consumer confidence and delay recovery. Which, however, appears quite distant. According to the IMF, in the financial year that began in March this year, growth will contract by 4.5%: the most serious since 1961. The rating agency Fitch, however, expects a contraction of 5 for this year % that in 2021-22 will be 8-9.5%.
Already when the lockdown was imposed in the spring, the previous financial year had closed with worrying signs: growth was expected to be reduced to 4.2% and confirmed. But in the last quarter which coincided with the beginning of the spread of the virus, the growth had been only 3.1% mainly due to the serious investment crisis and a 4.6% tax deficit. During the lockdown, the government had recklessly promised that the Indian economy would start roaring in two months. Now, according to experts, two years would be an optimistic hypothesis. Unemployment is 25% and it is difficult to plan effective economic aid in a job market in which nine out of ten Indians are employed in the informal economy.
And then there is the difficult relationship with Beijing. India was opening its fifth phase of economic reopening in fits and starts, when suddenly the evanescent Himalayan border became a dangerous point of friction with China. The clashes have been contained by diplomacy but it becomes increasingly evident that Beijing has now irrepressible ambitions and that Delhi must review its international profile. “Atma Nirbhar Bharat”, India will do it itself, promises Narendra Modi. But this is not the time to boycott China and other countries.

By Domenico Greco

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