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Why India's economy can't afford another lockdown

Seerat Chabba New Delhi
July 29, 2021

As experts warn of a potential third COVID wave, many Indians are worried about their next paycheck. Small businesses and informal workers fear another lockdown could spell an end to their livelihoods.

Khan Market in Delhi
Micro, medium and small-scale business owners such as those in Delhi's Khan Market fear another COVID lockdown Image: Seerat Chabba/DW

As a delayed monsoon finally reaches New Delhi, shopkeepers at a local market duck under covers and frantically attempt to keep their merchandise from getting wet.

They say they cannot afford any further blow to their small business following more than a year of erratic income due to the coronavirus pandemic. Now there is fear of another crippling COVID-induced lockdown.

"This government cannot survive another lockdown," Ashish Kumar (not his real name) tells DW. "They will get voted out if further restrictions are imposed on us."

Kumar runs a small shop in Delhi's upscale Khan Market. His tiny shop, a 3-foot-by-3-foot (.28 square meters) hole in a wall filled with clothes, is still able to feed his family of five.

But as experts warn of a potential third COVID wave in the coming months, India's flagging economy — especially the micro, medium and small scale enterprise (MSME) sector — could face devastating repercussions from another lockdown.

Of the 63.4 million units that make up India's MSME sector, 99.4% are micro-enterprises, government data shows.

Indian workers fear tough COVID measures will boost unemployment

Market bookstore survives COVID

Located about 15 meters from Kumar's store is the Faqir Chand bookstore. Abhinav Bahmi's family has been running the shop for four generations. The bookstore has seen numerous periods of severe political instability, economic downturns, and most recently, India's second wave of the coronavirus.

Shops closed down nationwide and offices resumed home office.

"The store was closed for nearly three months," Bahmi tells DW. The family left for their hometown in a nearby state.

"We were among the luckier ones," he says. But for many people like Kumar, shutting shop even for a few days has serious repercussions, and working from home was not an option.

Informal economy workers excluded

In the midst of the second wave, the government released data that indicated that India's gross domestic product (GDP) grew at 1.6% in the January-March quarter of the  2020-21 fiscal year, just as coronavirus infections were rising. A contraction of 7.3% was reported for the entire fiscal year.

But some economists slammed the data as vastly exclusionary.

"Our GDP data just doesn't take the unorganized sector into account. It is entirely based on the organized sector, and largely the corporate sector data," Indian economist Arun Kumar told DW.

Kumar recently authored a book about the economic impact of the pandemic, titled Indian Economy's Greatest Crisis: Impact of Coronavirus and the Road Ahead.

"The behavior of the unorganized sector is very different from that of the organized sector. The latter braved the storm a little better, but mostly at the expense of the unorganized sector," he said.

"If the unorganized sector and the destruction of agriculture are taken into account, the economy contracted by 29%," Kumar added.

Most Indians typically purchase daily necessities from a local store close to their homes. But during COVID, many have turned to online shopping, much to the dismay of small neighborhood stores.

Growing fears over third wave

As India continues to record about 40,000 new infections daily, medical experts have warned of an impending third wave that could jeopardize efforts to bring the economy back on track.

"When the cases started to spike in February, we knew another wave was coming but our expertise was disregarded," Dr. Rajan Sharma, former president of the Indian Medical Association, told DW. "No one was prepared for what followed."

The pandemic moves in ebbs and flows, and no expert can give a date when a third wave will start nor its intensity, Sharma explained.

Vaccinating a large part of the population is crucial in preventing a significant rise in infections, he added.

More than six months after India began the world's largest vaccination drive, only 7% of the country's population has been fully vaccinated.

"Vaccinating a population as vast as ours is a monumental task," he says. "In addition to acquiring the number of shots required, people also need to trust medical advice."

According to Sharma, doctors also need to be stakeholders in policy formulation to successfully manage future waves.

"The country needs an 'Indian Medical Service' just like it has the 'Indian Administrative Service' or 'Indian Revenue Service.'"

Calls for government assistance

India faces the dual challenge of ramping up vaccinations in the interiors of the country and reviving its flailing economy.

The government needs to cater to the micro sector by providing help in the form of marketing, finance, technology, Kumar said.

"The economy is suffering from a lack of demand. If the people don't have the purchasing power, the economy cannot recover," Kumar said, adding India should boost rural employment guarantee schemes and launch similar schemes in urban areas for the unemployed.

But for now, the small shop owners at Khan Market do not have the luxury to think about the state of country's economy. For now, Ashish Kumar needs to protect his merchandise from the rain and buy rice to feed his family.