Article:
As per the Centre for Monitoring Indian Economy (CMIE) data of September 2020, the economic recovery post-lockdown has unravelled some paradoxes for India. Interestingly, China registered growth for the third consecutive quarter (July-September 2020). The CMIE, established in 1976, is a prominent business information company mainly functioning as an independent think tank.
Employment Scenario
According to CMIE data, a revival in employment is being observed amid a decline in labour force participation, a term defined as the percentage of those engaged or actively seeking work in the population. Typically, when more people secure jobs, it indicates a surge of job seekers. This unusual trend can be understood by examining rural and urban data separately.
Rural areas are witnessing a rise in employment due to post-harvest activities. In contrast, urban areas are losing jobs. High-quality, well-paid jobs in urban regions are being replaced by lower-paying rural jobs. This suggests that migrant workers are not returning to the cities at the rate they should have been.
Inflation Issues
The lockdown caused shock to India’s supply side, triggering a rise in headline inflation mainly led by increasing food prices. Headline inflation encapsulates total inflation within an economy, including commodities like food and energy. An unexpected trend, however, is the hike in core inflation – non-food, non-fuel inflation – during a period projected to note a record contraction in growth.
Ideally, the lockdown-triggered slump in demand should have resulted in a core inflation drop.
Consumer Confidence
The latest consumer confidence survey by the Reserve Bank of India (RBI) presents another unexpected development. The central bank’s ‘current situation index’, which gauges overall consumer sentiment regarding the current economic conditions, hit an all-time low in September 2020. However, ‘forward-looking surveys’ show that consumer confidence for 2020-21 has improved. Despite deteriorating household conditions, the survey indicates households foresee better prospects for the future.
Growth Projection
According to an IMF World Economic Outlook (WEO) report, the Indian economy is expected to be the worst affected among comparative countries such as China, USA, Pakistan, and Brazil. India’s economic downturn not only appears severe in the short term but also in the medium term. The IMF has also doubled its prediction of India’s GDP contraction rate.
China’s Economic Performance
China’s economy continued to gather momentum in the third quarter with a GDP growth of 4.9% YoY in the July-September 2020 period. Increase in tourism, industrial production, and exports have created jobs and generated revenue for millions in China. However, consumption is yet to regain its normal vigour.
The International Monetary Fund (IMF) foresees a 1.9% expansion in China’s economy in 2020, making it the only major economy to predict growth in a year marred by the pandemic. This economic rebound closely follows China’s broad return to normalcy earlier in 2020 after imposing stringent lockdown measures, extensive contact tracing, and international travel restrictions during the first half of the year.