Coronavirus Shatters India’s Economy – The New York Times

But its stature in the world is slipping. Last quarter the Indian economy shrank by 24 percent, while China’s is growing again. Economists say India risks losing its place as the world’s fifth largest economy, behind the United States, China, Japan and Germany.

“This is probably the worst situation India has been in since independence,” said Jayati Ghosh, a development economist at Jawaharlal Nehru University in New Delhi. “People have no money. Investors aren’t going to invest if there is no market. And the costs have gone up for most production.”

Many neighborhoods in the capital of New Delhi where low-paid workers used to live are deserted, shell-like, a hot wind blowing through empty, tin-walled shacks. A few years ago, when the economy was expanding at a 9 percent clip, it was difficult to find a place here to rent.

When Mr. Modi was swept to power in 2014 on a tide of Hindu nationalism, many Indians felt their nation had finally found the forceful leader to match their aspirations.

But Mr. Modi has concentrated his energies on divisive ideological projects, like a new citizenship law that blatantly discriminates against Muslims or tightening the government’s grip over the mostly Muslim region of Kashmir.

Quarter by quarter, India’s economic growth rate has been dropping, from 8 percent in 2016 to 4 percent right before the pandemic. Four percent would be respectable for a developed country like the United States. But in India, that level is no match for the millions of young people streaming into the work force each year, hungry for their first job.

Many of the complaints that investors make about India — the cumbersome land policies, the restrictive labor laws, the red tape — predate Mr. Modi. But his confidence and absolutism, the same qualities that appealed to many voters, may have added to the problems.

Four years ago he suddenly wiped out nearly 90 percent of India’s paper currency to tamp down corruption and encourage digital payments. While economists cheered both goals, they say the way Mr. Modi sprang this move on India did long-lasting damage to the economy.

That impulsiveness emerged again when the coronavirus struck. On March 24, at 8 p.m., after ordering all Indians to stay indoors, Mr. Modi shut down the economy — offices, factories, roads, trains, borders between states, just about everything — with four hours’ notice.

Tens of millions of Indians lost their jobs instantly. Many worked in factories or on construction sites or in urban homes, but they were migrants from rural India.

Fearing they would starve to death in city slums, millions poured out of the urban centers and walked, rode bicycles or hitched desperate rides back to their villages, an epic reverse migration from city to countryside that India had never seen. That dragged coronavirus into every corner of this country of 1.3 billion people.

Now, looking back on it, many economists trace the root of India’s interlocking crises — spiraling infections and a devastated economy — to this moment.

“India’s embarrassing slowdown in the second quarter of 2020 is almost entirely because of the nature of the lockdown,” said Kaushik Basu, a former chief economist at the World Bank and now a professor at Cornell. “This may have been worth it if it arrested the pandemic. It did not.”

He called the approach “lockdown-and-scatter” and said Mr. Modi’s policies had been a “failure.”

Some workers have trickled back to the cities. But the construction and manufacturing industries have contracted sharply because many migrant laborers remain so traumatized, they don’t want to ever go back.

“We went hungry for days,” said Mohammad Chand, who once worked in a garment factory near Delhi but fled to his ancestral village, hundreds of miles away. “I had to shunt from place to place after being thrown out by the landlord. Even relatives started showing us the door.”

“I don’t want to be in that situation again,” he said.

In Surat’s textile market, Jagdish Goyal sat scowling in his deserted shop with piles of women’s suits in teals and oranges, priced for the working poor, now stacked to the ceiling.

“Nobody’s buying,” he said. “Why? Because there are no social functions. No weddings to dress up for. No places to go. No big birthday parties. People are scared to go out.”

Fear of catching the virus seems to be a decisive factor in India’s economic crisis, extending beyond the lockdown. Going out to shop means risking illness in a time when sick people are sometimes turned away from hospitals.

According to a recent Google Mobility Report, which tracks cellphone data, trips to retail and recreation areas have dropped by 39 percent compared with before the pandemic. In Brazil and the United States, the only countries with more coronavirus infections, the drops were less than half as severe.

Mr. Modi’s government has provided some emergency relief, around $260 billion, but economists said too little flowed to the poor. Tax revenues have plummeted, some states are unable to pay health care workers and government debt is approaching its highest level in 40 years.

Still, Mr. Modi’s popularity keeps rising. A recent poll published in India Today, a leading newsmagazine, showed his approval rating at 78 percent, the highest in five years.

Part of this can be explained by the competition’s collapse. The biggest opposition party, the Indian National Congress, has been hit by defections, back-stabbing and a never-ending existential crisis on who should lead it. And Mr. Modi’s embrace of Hindu nationalism plays well within the Hindu majority, about four-fifths of the population.

“His protection of Hindu values is a big reason why I support him,” said Mr. Goyal, the seller of ladies’ suits. “If our self-respect isn’t alive, what good is the economy?”

A few parts of the economy are doing OK. Agriculture has been lifted by strong monsoon rains. In some cities, like New Delhi, many businesses are open again, though they might have new signs on the doors that say: “No more than 3 People Inside” or “Flat 40 Percent Off!”

But the virus and the economy are intertwined, and India’s virus graph is a steady staircase, going up. India is also No. 3 in virus deaths, though its per capita death rate is much lower.

Anxiety hangs in the humid air of Surat’s textile zone.

“No one comes for a shave anymore,” lamented Akshay Sen, a young barber with a few coins in his pocket.

His words echoed off the shuttered shops. Behind him stood a bunch of men milling around a tea stand but not buying any tea.

Behind all that, like a warning sign on the horizon, stood yet another tall brick smokestack, smokeless.

Reporting was contributed by Shalini Venugopal Bhagat, Sameer Yasir, Kai Schultz, Suhasini Raj and Hari Kumar.