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Urban office workers bore the brunt of the pandemic as millions of jobs disappeared during the lockdown
The first to lose their jobs were those in retail, hospitality and aviation. A month after the lockdown, 121 million Indians were out of work, according to the Centre for Monitoring Indian Economy.
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While the pandemic wrecked havoc with white-collar jobs, rural job creation saw outsized support from the government.
Most of the jobs that returned as the economy clawed back to recovery were in the informal sector. The rural employment guarantee scheme saw a big funding boost, taking the allocation for the year to a record Rs 1.1 trillion.
Funds on tap
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RBI Governor Shaktikanta Das
The rescue package
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Finance Minister Nirmala Sitharaman
As the economy reeled from the effects of the world’s biggest lockdown, the finance minister announced stimulus measures worth over Rs 20 trillion under the Aatma Nirbhar Bharat Package. It included a generous dose of bold measures to make India self-reliant but failed to create a big impact, as at the aggregate level government spending was not increased significantly. This hobbled the pace of recovery.
A high note
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The inflation outlook worsened this year, remaining above the Reserve Bank of India’s tolerance band of 2-6 per cent, even as the economy contracted.
Food prices rose steadily as Covid restrictions affected supply. Inflation is expected to ease closer to 4 per cent in the first-half of 2021, creating room for further policy easing.
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India’s trade policies turned markedly protectionist to boost local manufacturing and reduce import dependence.
Import tariffs, restrictions, and production-linked incentives ring-fenced a number of sectors. As the geopolitical situation between India and China worsened following the Ladakh standoff, calls to boycott Chinese goods picked up steam with traders burning Chinese goods in market squares.
Pains and gains
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Chairman of the New Development Bank KV Kamath
As the government deferred the lockdown pain by letting borrowers put off loan repayments, a committee under banker KV Kamath was formed to suggest the parameters for restructuring the debt of firms affected by the pandemic. The demand for debt restructuring, however, remained low through the year.
Above the curve
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Even as the real economy contracted, the markets continued to soar.
The benchmark indices managed to overcome the deep losses suffered in March in the immediate aftermath of the pandemic to post a healthy 13 per cent year-to-date gain. The BSE Sensex touched its all-time high of 46,960 on December 18. The rebound was aided by robust foreign portfolio flows, thanks to the gush of liquidity flooding the global financial system.
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New business orders collapsed at a record pace and firms sharply reduced their staff numbers. September recorded a marginal rise of 0.6 per cent but the growth was largely on account of low base. A real recovery is still awaited.
The digital surge
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The pandemic brought the cash-free future a little closer to India.
Digital payments soared as people wary of the surface transmission of the virus from currency notes shunned cash.
A code for change
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September saw reforms in the form of three new labour codes. It was the first time that labour laws were changed since Independence.
While the new laws increased the ambit of social security by including gig workers and inter-state migrants in its fold, they also watered down the labour rights for workers in small establishments by making it easier for employers to hire and fire workers.
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As the stock markets soared, so did the forex reserves, reaching a record high of $579.346 billion by December.
Foreign portfolio investors drove up the reserves with mega investments, crude oil prices and foreign travel also helped, providing comfort to the government at a time when the economy was contracting.
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The farm sector is expected to see a growth of 2.5 per cent in 2020-21, as against a contraction in the overall economy.
The farm sector provided the much-needed support to the economy during the pandemic, thanks to everything from a good crop season to generous government stimulus support.