Over the last two years, numerous books and articles have been authored on the socio-economic fallout and policy shortcomings pertaining to the COVID-19 pandemic. However most of these efforts have focussed on one set of factors and mainly presented one set of outcomes often constrained to one sector of the economy. Jayati Ghosh’s book arrives as an ambitious project of documenting outcomes over several sectors of the economy to connect the dots and provide an informed estimate of the impact of the pandemic even for a non-specialist reader.
More specifically, Ghosh provides the reader with an evaluation of the economic fallout and efficacy of policies undertaken by the government in the wake of the pandemic. Additionally, the author examines the sociological, political, and psychological impacts resulting both from widespread illness and policies of governments that limited economic and social activity. The presentation combines the analysis of statistical aggregates with supporting anecdotes that help build a narrative in the minds of readers.
Ghosh starts with a discussion on the effect of the pandemic and subsequent lockdowns on the global economy. She emphasises that the economic impact was more severe in countries in the global south.
An important reason she identifies for this is the presence of large informal sectors where workers have no institutional recourse to employment-linked benefits or protections and therefore have no viable income if regular work ceases. To add to worker woes, governments of the global south did not provide the substantial deficit-financed fiscal stimuli that for example governments in the EU provided their workers and citizens. Finally, as she points out, vaccine apartheid caused by governments of advanced countries buying up the bulk of the doses of the newly made vaccines kept populations in South Asia, Africa, and Latin America largely unvaccinated, contributing to the difficulty in opening up economies for work.
On the eve of the pandemic, according to Ghosh, growth in the Indian economy had slowed down from what it was a decade ago. The unsustainable debt-financed services and retail boom seen between 2003 and 2012 due to financial deregulation did not ultimately boost incomes over the medium term except for a small elite urban minority. In addition, the quick implementation of demonetisation and goods and services tax (GST) a few years earlier had already slowed down the economy. In fact, according to the RBI data Ghosh cites, the growth rate in GDP was only 3.4 per cent in the January-March 2020 quarter, a far cry from the almost 9 per cent from a decade before. An economic recession or even recessionary expectation is often seen to lead to countercyclical measures such as governments giving industries tax holidays in a bid to boost domestic investment. The Government of India was no exception. However, this meant that essential services and merit goods such as education and health saw lower budget allocations in the years leading up to the pandemic.
Starting from January 2020, COVID-19 infections in India started to ramp up, which prompted the government to implement a hard lockdown of industries and other institutions on March 25, 2020. The ensuing livelihood loss and dislocation, including reverse migration of workers mostly from the informal sector, meant that aggregate consumption plummeted in the short term. As social distancing is difficult in the cramped mohallas where most of India’s population lives and no vaccines were available, infections in the first wave of COVID-19 grew through May and June of 2020, peaking in August-September and ebbing away by December-January 2021.
With no memory in recent history of managing such outbreaks of epidemic, the first wave caught the system completely off-guard. The government intervened to disburse aid in a largely centralised manner using certain Central and State-level funds (eg, PM-CARES and PMGKAY), but as Ghosh argues using different informational sources, it encountered significant difficulty in both disbursing aid and managing infections. Furthermore, the amounts disbursed were small and often delayed.
One of the factors, according to Ghosh, that really hurt India was the late introduction of vaccines: they received regulatory approval in January 2021, but vaccination began only in March 2021.
In the meantime, with the opening up of industry and a remigration for many working individuals who travelled back to urban workplaces from rural homes, infections were rising again. The second wave, which was primarily of the Delta and Delta plus variants of COVID-19 (April to September 2021), was more devastating than the first wave. The already tired health care system largely gave way, and shortages of medical equipment (notably ventilators, hospital beds, and oxygen cylinders) all across India substantially increased the death toll.
So, how many people did die in India from COVID-19? Ghosh sensibly does not provide one figure and points the reader to a number of estimation exercises, throwing up significantly different sets of numbers, from government sources, academic studies, and anecdotal journalistic accounts.
The main economic fallout of the pandemic as explained by Ghosh was a slowdown both in industrial output and employment. In turn, the agricultural sector, which depends on the industrial sector to supply primary inputs, felt the pinch of cessation of economic activity and closure of mandis, or large agricultural markets. The government, however, adopted a fiscally conservative stance and used monetary policy in a package that lowered interest rates and the cash reserve ratio for banks in order to stimulate investment. However, borrowing was low because of a depressed business outlook in the face of a demand decline. The latter also spurred a lower hiring of labour, leading to rising inequality.
According to Ghosh, using expansionary monetary policy in a time of declining demand can lead to stagflation, that is, rising prices with low growth of industrial output. An important reason Ghosh gives for the government not being generous with deficit financing is fear of adverse effects on its balance of payments as increased consumption out of transfers may have led to increased import demand.
In the penultimate chapter Ghosh focusses on women’s employment and concludes after reviewing a number of studies using primary data that women, particularly young women, were the worst casualties of the employment crisis triggered by the pandemic and lockdown.
After building this comprehensive and depressing picture of India’s socio-economic condition pre- and post-pandemic, Ghosh offers some policy prescriptions in the last chapter. These unsurprisingly take the form of mostly demand-side interventions and include a proactive fiscal policy that creates a floor for social protection in the form of providing universal access to nutrition, health and sanitation; employment; and pensions for those who cannot work. The greatest strength of this book is the wide focus it takes, aggregating facts, figures, and arguments from different strands of literature, in a robust attempt to build a composite picture of India before and after perhaps its most devastating health crisis in modern history.
The well-researched book will be of interest not only to Indian citizens and governments but all readers who are interested in studying how infection, government response, and economic activity can interact to destabilise a major economy in a pandemic. Furthermore, the composite picture of the crisis presented here may potentially provide some policy answers on how to deal with the outbreak of epidemics in the future.
Sujoy Chakravarty is a professor of economics at the Centre for Economic Studies and Planning, School of Social Sciences, Jawaharlal Nehru University, New Delhi.
- The numerous books and articles on the pandemic to date have covered one set of factors or outcomes.
- Jayati Ghosh’s The Making of a Catastrophe provides the reader with an evaluation of the fallout over several sectors of the economy and the efficacy of policies undertaken by the government in the wake of the pandemic.
- The book says growth in the Indian economy had slowed down from what it was a decade ago even before the pandemic and that the first wave caught the system completely off-guard.
- The book says the late introduction of vaccines really hurt India.
- During the devastating second wave, the already tired health care system largely gave way.
- The main economic fallout of the pandemic as explained by Ghosh was a slowdown both in industrial output and employment
- The last chapter offers some policy prescriptions.