NEW DELHI—India’s economy, one of the hardest hit by the Covid-19 pandemic, started growing again last quarter, but the recovery is being driven by those with the highest incomes, while the poor are still struggling.
The country’s gross domestic product grew by 0.4% in the three months through Dec. 31, driven by India’s biggest companies and richest consumers. They emerged from the worst of the Covid-19 crisis last year with more savings and lower costs, and are now lifting growth as the spread of the virus slows.
Mahesh Vyas,
chief executive for the Centre for Monitoring Indian Economy, an independent think tank in Mumbai.
“If you are a carpenter or a plumber or a mason or a cart pusher or a hawker, you lose income for the day,” when Covid-19 keeps people at home and companies closed, Mr. Vyas said. “The hit is very direct.”
India may have had more people pushed back into poverty by the coronavirus than any other country. Lifting the incomes of those near the poverty level will determine the speed and shape of its post-pandemic recovery. Its struggle, even as its daily new infections have plunged to less than a fifth of their peak last year, could foreshadow struggles in other emerging economies.
India isn’t the only country experiencing this two-speed recovery. Even in the U.S., people with lower incomes and those that work more with their hands and less online have been harder hit.
But the split between the haves and have-nots is particularly stark in emerging markets.
As Indonesia’s GDP contraction slowed slightly last quarter, there are still signs that the urban poor have been especially hard hit, with many in the construction and manufacturing industry losing jobs or facing severe pay cuts.
South Africa expects 3.3% GDP growth this year after an estimated 7.2% drop last year, but a national survey late last year showed that already-disadvantaged South Africans were less likely to bounce back from the economic damage wrought by the pandemic, and workers with lower education levels were less likely to find employment, while Black households, especially those headed by women, were most likely to experience hunger.
Brazil’s economy fared better than most of its neighbors in 2020, mainly due to a government program that made monthly cash payments to the country’s poorest residents, many of whom worked in informal jobs that disappeared when social-distancing measures kicked in. Latin America’s biggest economy lost more than eight million jobs in 2020, with domestic workers, the self-employed and people in other informal positions bearing the brunt of the job destruction. GDP probably contracted around 4% in 2020 and is forecast to grow about 3.3% this year.
India’s services industries, such as food, travel and beauty, have been slower to recover, economists say, as Indians are still going out less than usual. Many lower-income people are employed in those industries.
New Delhi salon owner Nima, who goes by one name, charges less than $7 for a haircut but says most of her clients still haven’t returned. She has had to cut her staff while she waits for her customers to return.
“Forget about making money, we are worried about how to cover our losses,” she said. “We are just waiting for people to feel safe enough to walk in for appointments again, but it’s going to take time.”
The small minority of large Indian companies and affluent citizens have been lifting a lot of economic indicators, triggering robust rebounds in everything from car sales to company earnings and stock prices.
Indian domestic auto sales volume—an indicator of the consumption of India’s richest consumer—had been shrinking before Covid-19 hit the world but was up more than 10% in the three months through December.
Indicators for the other side of the economic spectrum have been less rosy. Lower-income consumers have been hardest hit by Covid-19. A survey by the Centre for Monitoring Indian Economy of different income groups shows that while consumer confidence for the richest has shot up 46% since last August, the confidence of the poorest group has risen only 11%.
Incomes, particularly for the poor, are getting squeezed as companies have decided not to rehire people as the economy has opened up. This trend is likely here to stay and will continue to lead to lower employment levels and wages, said Mr. Vyas.
Workers assemble mobile phones at a factory in the city of Noida, India.
Photo:
Anindito Mukherjee/Bloomberg News
“India’s headed towards discovering a new norm where employment—or at least good, quality jobs—is going to be far more difficult to get,” he said.
While stronger GDP growth is expected to eventually trickle down to many more corners of the country, those on the front lines say they see few signs that economic vibrancy from before the pandemic will return.
Raja Kumar,
who runs one of the hundreds of inexpensive hotels around the main New Delhi railway station, has lowered his nightly rates by a third to $20, but his rooms are still mostly empty. A few local businessmen have returned, but the backpackers haven’t, even as coronavirus infection rates have come down. It is the worst he has seen in 17 years in the business, and there are few signs it is getting better, he said.
“This crisis has ruined us,” he said. “We are just hoping the situation will change in the coming months.”
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Jonathan Emont
and Gabriele Steinhauser contributed to this article.
Write to Eric Bellman at [email protected] and Vibhuti Agarwal at [email protected]
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