The Local Economies in India are Beginning to Collapse as COVID Spreads

India is experiencing a second surge in Covid-19 that is spreading with more ferocity than any seen before in the more than yearlong coronavirus pandemic. It has overwhelmed city hospitals and has made it nearly impossible to create private hospitals to keep up with the number of sick people. Like other surges that affected countries worldwide, India's wave came after loosening restrictions and public complacency. The outbreak threatens to extend the pandemic itself, driving worldwide numbers to new highs. The impact of the new wave of the pandemic is threatening local economies, which are at the point of collapse. India is in desperate need of assistance, but vaccine help might come too late. The lack of economic activity has weighed on the Indian Rupee in forex trading, which has declined 2.25% in April.

India's Local Economies are Feeling the Pinch

Several indicators show that India's economy is already feeling the impact of the ongoing deadly COVID wave. While some of this impact is due to local-level restrictions that some state governments have imposed, others are because citizens are choosing to stay indoors. There is slowing railway movement which is not a good sign. More than 30% of all industrial goods in India are transported via trains. A good gauge of economic activity in India is railway freight volumes. With many cities like Mumbai and Delhi, under state government-imposed lockdowns, daily average railway freight volumes in India have dropped by 11% month-on-month in April.

The fall in railway freight volume is an indicator of falling demand. This metric also includes trucking data. The average number of daily e-way bills generated in April is down 300,000 in April to 2.0 million from 2.3 million in March. These bills are necessary for moving goods from one state to the other. Unemployment is also on the rise, which is not a good sign In April 2020, unemployment in India spiked to 23%. This surge in employment is a reflection o the lockdown. When India reopened in February, the job market started recovering, and by February 2020, the unemployment rate fell to 6.9%.

The declining economic picture is reflected in Nomura's India Business Resumption Index, which shows that the business activity in India is getting hammered, falling to 90.4 from 99.3 during the first week of February.

India Needs Help

In late April 2021, India reported surges in the pandemic during the last weekend of the month. Its request that the U.S. allows the export of the vaccine's raw material was initially denied by the United States. The government said that the U.S. had a responsibility to look after Americans first. A State Department spokesperson was quoted: "It is, of course, not only in our interest to see Americans vaccinated, it is in the interests of the rest of the world to Americans vaccinated." This initial response was reversed over the last weekend in April. The U.S. will be sending India raw materials for the AstraZeneca vaccine.

Additionally, there will be an aid for production. According to sources, the U.S. has a stockpile of an estimated 20 million AstraZeneca vaccines. What is odd is that the U.S. FDA has still not approved the AstraZeneca vaccine for emergency use.

The Bottom Line

The upshot is that the virus is spreading very rapidly across India, and the country needs help. Cities across India are beginning to feel the pinch that can be viewed in the transportation data declining rapidly. Both rail and trucking data show that the Indian economy is slowing as the lockdown takes hold. India is in desperate need of a faster rollout of the vaccine. It needs countries like the United States to provide both financial aid and the raw materials required for the AstraZeneca vaccine rollout.

This article does not necessarily reflect the opinions of the editors or the management of EconoTimes