The Covid-19 pandemic has wrought about great changes in the lives of people across the world. The case of the Indian economy has been no different. It has been battered by the first and the second waves of the pandemic and has only now shown some signs of recovery.
Hardest Hit Sectors
Clearly there are a lot of sectors that have been deeply affected.
The hospitality sector is one that has been hit very hard. It is a huge employer and a large number of people have been rendered jobless as a consequence of the pandemic. Though revenues are now finally on the rebound, there is a long way to go before this sector is back to its pre-pandemic stature.
An important feature of the pandemic has been its impact on the urban poor. India witnessed large-scale migration of the urban poor during the first wave of the pandemic when a lockdown was imposed in the country in March 2020.
Many traditional sectors of the economy have fallen by the roadside, while other new sectors have emerged, including e-commerce. PPE (Personal Protective Equipment) kits were not available in the country during the early phase lockdowns. However, the scenario has changed now.
In the second wave of the pandemic, there was a severe shortage of oxygen cylinders, and many countries came to help India, including Japan.
Awareness has grown that India’s total allocation towards healthcare is much less than that of many countries, and this needs to change. Experts from this field have noted that the healthcare allocation should be increased to at least 2.5 percent of GDP.
Another aspect of the pandemic worth noting is that a lot of Indians have come home from the countries they were working in, and this has hit the inward remittances very hard. India is the country which receives the most overseas remittances. In 2021, for example, India received $87 billion USD in remittances, with the United States ーthe single largest sourceー accounting for over 20 percent of all remittances, according to the World Bank.
How Japan Can Help
Japan provided direct aid to India during the first wave of the pandemic. However, there was also collaboration with Australia, Japan and the United States under the Quad mechanism in the fight against the pandemic. The joint statement issued at the end of the first-ever virtual Quad summit in March 2021 noted that “building on the progress our countries have achieved on health security, we will join forces to expand safe, affordable, and effective vaccine production and equitable access, to speed economic recovery and benefit global health.”
Meanwhile, Indian pharmaceutical companies have been at the forefront of the fight against the pandemic both in India and overseas. Under the “Vaccine-Maitri” scheme, New Delhi has sent vaccines to different parts of the world (especially developing regions) before the second wave of the virus. Vaccine exports have now resumed after the end of the second wave of the pandemic.
The Government of Japan announced an assistance package of $9.3 million USD in 2021 to support India’s fight against the pandemic. This grant, channeled through the United Nations International Children’s Emergency Fund, better known as UNICEF, helped India to provide for cold chain equipment (CCE) including cold-storage facilities, to ensure vaccines reach the farthest corners of the country.
While the Indian economy is facing significant challenges on the employment front, Japanese investment in the infrastructure sector has helped create a huge number of jobs, especially in the rural-areas. India has already been the biggest recipient of Japanese Official Development Assistance for a long time now, which has helped push infrastructure growth in India. Other areas of cooperation include green-technologies, where Japanese companies are world-leaders.
Japanese Investment Support
Japanese companies are some of the biggest investors in India. There is also room to grow as Japanese companies seek to relocate their supply chains from China to Japan and the Southeast Asian countries in light of the COVID-19 pandemic, and also in light of political tensions with China. For both reasons, India can be an attractive option for Tokyo.
Inside India, in spite of the anger directed at China among the Indian populace because of Chinese incursions in the border areas, China’s trade surplus with India has widened in terms of overall trade. This means that India needs to broaden its trade basket.
New Age Indian Economy
In addition, the coronavirus pandemic has badly impacted the tourism sector in both India and Japan, and now is the time to revive the same. Japan, which has relied on Chinese tourism in recent years, should also be looking at alternate sources of tourists since many times Chinese tourist inflow comes with political strings attached. For example, it has been used as a political weapon in the case of issues relating to both Taiwan and South Korea.
Beijing has also been on an aggressive warpath in its immediate neighborhood. A weak Indian economy is not good for Japanese security interests and vice versa.
The Indian economy has forever changed now after the pandemic, and it is growing. The 2022 Economic Survey notes that “the one clear prediction is of 9.2% GDP growth in 2021-22 and 8-8.5% in 2022-23”. This presents a big opportunity for Japanese companies to contribute to what has become a new-age Indian economy.
Clearly, the Indian economy is on a rebound and provides a chance for Japanese firms to look beyond the saturated Chinese market and some of the markets in Southeast Asia. The relatively young Indian populace has been driving up demand for all kinds of goods. There is no doubt that Japan and India can do so much together in this fight against the economic impact of the pandemic.
Author: Dr. Rupakjyoti Borah
Dr. Borah is a Senior Research Fellow with the Japan Forum for Strategic Studies. The views expressed here are personal. Twitter@rupakj