One measure is the change in gross domestic product (GDP). The pandemic chipped away 7.3 per cent of India’s real GDP in 2020-21
I am sure I am not the only one to think that the pick-up in vaccination is heartening. As we get a feeling that we are winning against Covid-19, we should also be mindful about what we’ve lost along the way.
Why? To make the correct corrections, we need to identify the extent of the problem first. I posed three questions to myself.
How much power did the economy lose since the pandemic began?
One measure is the change in gross domestic product (GDP). The pandemic chipped away 7.3 per cent of India’s real GDP in 2020-21 (real GDP is the GDP in nominal rupee terms adjusted for inflation). Among the GDP components, consumer spending fell 9% and investments contracted by more than 10%. Manufacturing, services, and construction lost value somewhere in the range of 7-9%. Agriculture was the only sector that grew its gross value added (GVA).
But though this tells me the measure of loss, it does not tell me how much this loss means over a slightly longer period of three to four years. To understand it better, I stumbled upon the second question.
How grave was the loss?
To ascertain that, let us look at GVA levels in the past few years, in nominal rupee terms, without considering the impact of inflation. That will show us how much of the nominal value was lost over time.
Such was the loss that major sectors saw an erosion of value created in two or three years.
In 2020-21, GVA in manufacturing and the sector comprising trade, transport and communications was close to its levels in 2017-18. Value lost in construction was also similar; the GVA level last year was smaller than what had been achieved in 2018-19.
In other words, manufacturing lost three years of progress, while construction lost two, in the slowdown caused by the pandemic. Yes, we’ve gone backwards by a couple of years.
But while this question gives me a better answer, it still talks in terms of “manufacturing” and “construction”, which are intangible to my mind except the images of factories and bridges they prop up in my mind. To make the loss in economic activity more relatable to us, I arrived at the final question.
How far have we gone back in terms of the goods and services we consume?
In April 2021, the sale, consumption or production of things that we regularly use or consume went back to levels we had achieved several years ago.
Take, for instance, the output of core industries such as cement, refineries, steel, etc. Their production index was 126.7 in April 2021, a level India had already achieved in March 2017. If we look at the average output of the previous six months for a particular month, today’s output level was still achieved in January 2018. That’s a loss of three years of output. Very much in line with the answer to the second question.
But consider vehicle sales. Sales of passenger vehicles such as cars, SUVs, 12- and 20-seater travellers, etc, in April 2021 were at their 2016 levels. That’s a loss of five years.
Further down the line, the amount of electricity we consumed during the second wave was the same that we had consumed in 2014. Distance covered by Indian trains was very close to what they had covered — wait for it — back in 2012. Trains are an important mobility indicator in India.
The final blow came when I looked at sales of two wheelers, the most important proxy indicator of India’s rural economic health. Two-wheeler sales have gone back to the level achieved a decade ago.
True, this claw-back has happened due to sudden lockdowns, and they will also bounce back once restrictions are rapidly eased. But until vaccination reaches a landmark that kisses herd immunity, the extent of the loss we are going through offers us the direction in which we should look for solutions.
Can you think of more such sectors which have lost value and are ready to gain steam once again? Let us know.