What have we lost?

Around this time last year, many of us received a message on WhatsApp. It was an image in which the digits '2021' were calligraphed to resemble the word 'Hope' in blue, slanting slim cursive on a white background. A message of promise - of new beginnings, possibilities, an end to uncertainty, and regaining lost freedoms. Scientists had already readied vaccinations for COVID. Lockdowns were lifting. The economy was reopening. Life was about to un-pause at last. The nightmare of the pandemic seemed behind us. The mood was of preparing to return to normal life in a few months. Then the second wave came. Hope faded. We had underestimated the mutating virus. And we underestimated the incompetence of bureaucrats and politicians to safeguard life and business by rolling out vaccines swiftly, ensuring medical supplies and hospital beds, and managing something as basic as oxygen. Were we hopeful or over-optimistic? Many people spent the year in quiet reflection and grief. Having witnessed the third wave, powered by Omicron, here are questions to think about in 2022, balancing optimism against reality.

GDP is recovering but is the economy? The government released the advance estimate of GDP (gross domestic product) for 2021-22 on January 7. This estimate is technically more of a projection rather than an estimate, as it comes before the financial year ends on March 31, and is based on the data for the first six to eight months. After the budget's presentation day was brought ahead to February 1 from February 28, the government's statisticians introduced the advance estimate into the GDP estimates calendar. Its release in early January facilitates the making of the budget. Most of the budget's calculations require the GDP figure. What did the advance estimate this year tell us about the economy's recovery from the shock due to the pandemic? The GDP had shrunk by 7.3 per cent in 2020-21. It will grow this year. The forecast of 9.2 per cent GDP growth places India in the ranks of the world's economies that have recovered at least to their pre-COVID level of output. This is good news. But how good it is depends on how tightly the estimate represents the pandemic economy. The shock of the pandemic led to changes in the relative importance of different parts of the economy. The GDP is estimated as the sum of many, many parts: it's the aggregate of agriculture GDP, manufacturing GDP and within that organised sector, unorganised sector and so on... The relative changes between segments matter in the estimation exercise. If the organised financial services, for instance, coped well, as did biscuits manufacturing, the tourism and construction sectors came to a near halt. Some of the changes call for adjustments in weights and other methodologies of GDP estimation, especially where the contribution of the unorganised sector to output changed from what it was before the pandemic. It's well understood now that the unorganised sector did not have the wherewithal to cope with the economic shock and suffered more than the rest of the economy. The ratio of the unorganised-to-organised sector production is unlikely to be the same as before the pandemic. This has implications for GDP estimation and therefore the GDP number it comes up with. And so, it is difficult to say how closely the GDP estimates are reflecting the recovery in the economy.

Next, is inequality rising or reducing? The narrative so far has been that COVID deepened inequalities and increased poverty by hurting the poor more than the rich. This column too has made these points. But new research suggests income inequality fell during the pandemic (https://www.nber.org/papers/w29597). The researchers have found that this was not because incomes of the poor were supported significantly - by government or other sources. In fact, the paper found that government relief formed just a fraction of the incomes of the poor. The paper finds that poverty spiked sharply during the pandemic. The reason inequality lessened is that the rich are more dependent on the services sector for incomes. The services sector - travel, food, tourism, etc. - took the biggest blow of the COVID lockdowns. Manufacturing and agriculture were not as badly hit. Rich people do not derive their incomes as much from these sectors. The logic of these findings is hard to disagree with. Another report that is prepared by Prof Maitreesh Ghatak of London School of Economics and will be out soon will highlight how wealth and consumption inequalities have reduced during the Modi years. The debate on inequality and the K-shaped recovery is set to pick up, and will feed inputs into policy decisions affecting our economic future.

In absolute figures, the GDP is back to the pre-pandemic level. Do we feel as we did two years ago before COVID entered our lives? The neatly aggregated GDP says nothing about the chaos and human suffering the country went through. Does fatigue, anxiety and sense of loss we feel have a bearing on the economy? Economists would say keep emotions out. But economic decisions, as any other decisions, are not taken free of emotions. The cost of COVID isn't just the economic impact and the casualties. We have lost everyday freedoms. In the bureaucrat's rulebook, classroom learning has become unessential but religious gatherings can carry on. During the pandemic, bureaucrats and politicians tightened their stranglehold over our lives, issuing hundreds of notifications, allowing and disallowing activities, categorising lives and livelihoods into essential and unessential. A haircut may be unessential for some but absolutely the thing making the difference to a person's sense of well-being. And what of the person making a living out of cutting hair? What about daily-wage work - say at a construction site? Is that essential or unessential? Does the bureaucrat care to calculate the losses that may accrue if they happen to make mistakes in categorising business and life activities as essential and unessential?

Finally, when will COVID fade away - if it ever will? There's no way of knowing. Uncertainty means putting plans on hold. Hope eludes in these circumstances, but despair does no good.

Puja Mehra is a Delhi-based journalist and author of 'The Lost Decade (2008-18): How India's Growth Story Devolved Into Growth Without A Story'