When Fortune India’s journalists got together at the beginning of this year to conceptualise the May 2020 issue around the theme ‘Modi 2.0’ (and how the Narendra Modi-led Bharatiya Janata Party regime had fared in the first year of its second term), the discussions were centred around how the government, which was grappling with as lowing economy and declining consumption, would kick-start things again.
What would the Modi administration need to do to ensure that India’s growth rate moved much higher than the mid -4% it was tending to get stuck into? What were the steps needed to move the needle and get the economy back to a robust rate of growth?
And then came Covid-19. As the pandemic spread across the world, hitting the biggest and mightiest economies and bringing them to their knees, it became clear that this was a calamity which no economic forecast could ever have taken into account. The impact of Covid-19 threatened to derail the world economy, throw it into a deep recession, and there was no way India could be insulated from this tsunami. It is—despite objections from some quarters about this label—a Black Swan event, something which few could have foreseen or prepared for. The Modi 2.0 theme, then, had to be modified to examine the impact of the pandemic on an already sputteringIndian economy, and how the government could tackle this Black Swan.
As this issue was put together, it became increasingly clear that 2020 would be a washout as far as the world economy is concerned—a lost year in history. Throwing aside all economic calculations, the world, and India, is currently busy battling the pandemic and attempting to flatten the curve of infections and deaths by way of an extended lockdown.
China, which seemed to be limping back to normal after being devastated by the disease, is also teetering on the edge as it becomes clear that the pandemic can return anytime. In such a scenario, what can the Modi government do? With growth forecasts for India ranging from0% to 1%, it is believed India would have done well if it doesn’t fall into a recession, and manages to stay in positive territory. But what is urgently required to keep the economy afloat is government spending by way of an aggressive stimulus package to add to the ₹1.7 lakh crore spent initially for the weakest sections of the population, and which is clearly not enough given the sheer magnitude of India’s problems.
As factories, small enterprises, construction, aviation, and several other sectors of the economy sink deeper into trouble, the Modi government will need to pull out all stops and attempt to spend its way out of a potential recession. Whether the government has the ammunition to do that is the trillion-dollar question and something the cover story of this issue examines in detail. But as the Modi government grapples with the biggest test it has ever faced, it is now clear that the Indian economy will have to brace for a very new normal in a post-Covid world. A normal as novel as the virus which has infected the world.