How the Indian economy performed in 2021
When 2021 started, policymakers and people alike made the grievous error of assuming that India had seen off the worst of the Covid pandemic. The vicious second wave that struck during April and May made everyone realise how costly that mistake was and prompted the question: Will 2021 be a repeat of 2020 for the Indian economy?
- When the first quarter (April, May, June) GDP data was unveiled, the picture was neither as bad as the critics claimed nor as good as the government would have us believe.
- By the time the second quarter (July, August, September) the GDP estimates were released, it was clear that India’s economic recovery was still quite iffy and no way near the claimed “V-shaped” recovery.
- High unemployment, not GDP growth, is the biggest challenge facing India
- There were fewer people ( around 14 million less) employed in India in August 2021 than there were in August 2016.
- India’s comparatively low labour force participation rate. And the biggest reason for India’s low LFPR is its abysmal labour force participation by women.
- Women’s limited involvement in the labour force — many policy-induced reasons have aggravated the jobs-related distress.
- In just four years (2016-17 to 2020-21), and despite the Make in India policy push, the number of people employed in the manufacturing sector reduced by almost half.
- The other big worry for Indians in 2021 has been inflation.
- For the second year running, inflation rates have remained uncomfortably high.
- Part of the reason has been the RBI’s unwillingness to contain inflation lest it scuppers India’s fledgling growth recovery.
Inequality and Poverty
- No matter which way one looks at it, Covid has deepened inequalities of wealth, education, and gender as Oxfam’s report, titled “The Inequality Virus”, showed.
- These concerns were again shared by the World Inequality report.
- The unprecedented fall in poverty between 2004 and 2011 has been followed by an equally unprecedented rise between 2012 and 2020.
Economic reforms and controversies
- The government announced the creation of a bad bank to tackle the problem of non-performing assets in the banking system.
- Then, after several failed attempts, Air India’s privatisation finally took off.
- The government finally repealed the three contentious farm laws. The farmers are still asking for a guaranteed return on their produce.
- Last but not the least, this year’s Nobel Prize for Economics was given to three US-based economists for their “new insights about the labour market and showing what conclusions about cause and effect can be drawn from natural experiments”.
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