INDIA: An uptick in the economy and Indian vaccines eclipsed by farmer protests

Farmer protests, which laid siege to New Delhi in early December and grow by the day, could not have come at a worse time for the Narendra Modi-led Bharatiya Janata Party (BJP) government. Everything was heading in the right direction: the economy seemed to be turning the corner with expectations that the GDP contraction might not be as severe as feared; and the nation was ready to roll out two Indian Covid-19 vaccines. However, the shadow of the farmer protest – and public sympathy for it – may rob the government of its moment of triumph. Dates for the vaccination program are expected imminently. Plans are ready to inoculate frontline workers, the elderly and the infirm first, using the massive datasets from the Election Commission of India (ECI) in tandem with local health authorities. Although doubts have been expressed on the efficacy of one of the vaccines (Covaxin, developed by Bharat Biotech) because of insufficient clinical trials, the government is confident that it will be able to control the spread of the infection. That the vaccines have been developed domestically is, for a government heavy on nationalist rhetoric, the icing on the cake. The recovery in the economy is palpable. Goods and Services Tax (GST) collections have improved appreciably, reflecting the economy’s rebound. There are early signs of demand recovery in India’s non-oil, non-gold imports. These imports, which are a proxy for industrial demand, fell by 1.67% in November, an improvement on October’s 5% fall. Auto sales show an upward trend. And if the current pace of recovery is sustained, the fourth quarter of the current financial year may show a higher growth rate than projected. Although direct tax collections till 16 December were only 45% of the annual target, and are unlikely to improve in the remaining three months of the fiscal year, this is better than expected. The overall economic outlook, while not rosy, is not as bad as forecast. The fly in the ointment are farmers who are sticking to their two core demands: that the government repeal three laws envisaged to integrate agriculture within the bigger market economy; and that it guarantee in perpetuity a floor price for paddy and wheat – in essence, a subsidy. The government has declared it will not repeal laws that it believes are in the farmers’ eventual interest, and is concerned that any guarantee price could be highly inflationary. While the ruling party has denounced the movement as being motivated by the opposition, there is no denying its wide support. While die-hard supporters of the government continue to back it, the farmers are not without sympathizers: most in the lower echelons of the bureaucracy, police and small business have farming roots and empathize with them. The immediate problem the government faces is the potential embarrassment by the farmers’ threat to hold a protest on 26 January, India’s Republic Day which is marked by a massive military parade. Although it will be scaled down this year, the chief guest is expected to be UK Prime Minister Boris Johnson. The government is under pressure to get the farmers to end their protest before then. If it cannot, the gains of the economic rebound and the success of an India-made vaccine may be eclipsed.

January 4, 2021

Asia

INDIA: An uptick in the economy and Indian vaccines eclipsed by farmer protests

BY Aditi Phadnis

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January 4, 2021

Asia

INDIA: An uptick in the economy and Indian vaccines eclipsed by farmer protests

BY Aditi Phadnis

Report Contents

Registration

More by Aditi Phadnis

INDIA: Government tries to regain control of the pandemic

INDIA: Government lifts restrictions on vaccine imports as pandemic spreads

INDIA/PAKISTAN: A thaw after a long winter?

INDIA: Spike in infections raises economic concerns

INDIA: A growth budget in a pandemic year

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INDIA: Federal policies bring farmers to the streets as opposition fans flames

INDIA: Stimulus and hopes of a vaccine amid the threat of rising prices

INDIA: Politics begins around a vaccine that is yet to be developed