 "GDP contraction to job losses amid Covid-19: 2020, the year of new lows")
The first to lose their jobs were those in retail, hospitality and aviation. A month after the lockdown, 121 million Indians were out of work, according to the Centre for Monitoring Indian Economy.
Most of the jobs that returned as the economy clawed back to recovery were in the informal sector. The rural employment guarantee scheme saw a big funding boost, taking the allocation for the year to a record Rs 1.1 trillion.
The Reserve Bank of India did most of the heavy-lifting in the absence of a significant government stimulus to help stave off a recession. It reduced policy rates by 115 basis points and flooded the system with liquidity, which eased market rates.
As the economy reeled from the effects of the world’s biggest lockdown, the finance minister announced stimulus measures worth over Rs 20 trillion under the Aatma Nirbhar Bharat Package. It included a generous dose of bold measures to make India self-reliant but failed to create a big impact, as at the aggregate level government spending was not increased significantly. This hobbled the pace of recovery.
Food prices rose steadily as Covid restrictions affected supply. Inflation is expected to ease closer to 4 per cent in the first-half of 2021, creating room for further policy easing.
Import tariffs, restrictions, and production-linked incentives ring-fenced a number of sectors. As the geopolitical situation between India and China worsened following the Ladakh standoff, calls to boycott Chinese goods picked up steam with traders burning Chinese goods in market squares.
As the government deferred the lockdown pain by letting borrowers put off loan repayments, a committee under banker KV Kamath was formed to suggest the parameters for restructuring the debt of firms affected by the pandemic. The demand for debt restructuring, however, remained low through the year.
The benchmark indices managed to overcome the deep losses suffered in March in the immediate aftermath of the pandemic to post a healthy 13 per cent year-to-date gain. The BSE Sensex touched its all-time high of 46,960 on December 18. The rebound was aided by robust foreign portfolio flows, thanks to the gush of liquidity flooding the global financial system.
New business orders collapsed at a record pace and firms sharply reduced their staff numbers. September recorded a marginal rise of 0.6 per cent but the growth was largely on account of low base. A real recovery is still awaited.
Digital payments soared as people wary of the surface transmission of the virus from currency notes shunned cash.
While the new laws increased the ambit of social security by including gig workers and inter-state migrants in its fold, they also watered down the labour rights for workers in small establishments by making it easier for employers to hire and fire workers.
Foreign portfolio investors drove up the reserves with mega investments, crude oil prices and foreign travel also helped, providing comfort to the government at a time when the economy was contracting.
The farm sector provided the much-needed support to the economy during the pandemic, thanks to everything from a good crop season to generous government stimulus support.