That Which We Call a Depression

(Featured image source: the Economist)

By Bilal Moin

India has taken economic growth for granted. Given the rapid economic growth of the past decade, the gargantuan labour pool, and flattering title as the world’s fastest-growing economy, it seemed there was little that could stop the galloping nation. Since 2016, however, the illusions of seemingly infinite growth have begun unravelling. On November 27, 2019, Indian Finance Minister Nirmala Sitharaman remarked, “Looking at the economy in discerning view, you see that growth may have come down but it is not recession yet; it won’t be recession ever.” If the sanguine remark was questionable then, when India’s GDP was growing at 4 percent (the sixth straight fall in quarterly GDP growth), it appears severely misguided now that the country’s economy is said to have contracted by 9 percent.

Considering the Indian economy was showing troubling signs of contraction long before the emergence of COVID-19, the pandemic adds fuel to an already raging fire. In December, three months before the stringent nationwide lockdown, former Chief Economist of the IMF Raghuram Rajan cautioned that the nation was already in the middle of an “economic depression” with signs of a deep malaise. The lethal addition of economic co-morbidities to a global pandemic has resulted in India’s GDP declining by a staggering 23.9 percent in Q1 2020, making the nation the worst performing economy among the G20 nations in the quarter. As Dr. Rajan stated in a lecture at the Bendheim Center for Finance at Princeton University, the pandemic has highlighted and exacerbated pre-existing ‘fault-lines’ in the Indian economy. 

At present, as India finds itself trapped in the quagmire of mid-pandemic recovery, the government insists the current circumstances are but a minor hurdle on India’s journey to economic dominance. By downplaying the severity of the crisis, the government continues to ignore the blaring alarm bells, disregarding the counsel of economists and the hardships of the unemployed. Instead of reflecting on the past economic decisions, drafting solutions, or recognising the crisis as a depression, Mrs. Sitharaman struggles to concede that the economy has contracted. When asked to explain why the economy was experiencing a slowdown, Mrs. Sitharaman has chosen to blame forces beyond her ken, hailing the “minor” contraction as an “act of God.” Amidst the apathy and apprehension, one fact is apparent—this ‘contraction’ signifies a depression, the denial of which will have severe consequences. 

Global economies are in a state of depression. With sixteen million Americans out of work, the US is facing the worst unemployment crisis in seventy years. The United Kingdom’s economic output declined by 20.4 percent from April to June, engendering their worst recession since the government started keeping records in 1955. Brazil’s government debt is set to rise to about 95 percent of GDP in 2020 from 76 percent in 2019. With the World Bank forecasting a global economic contraction of 5.2 percent this year, the world will undergo the worst recession since World War II. In the latest issue of Foreign Affairs, Chief Economist of the World Bank, Carmen Reinhart, and Chief Economist at Mellon, Vincent Reinhart, describe the state of the global economy as “so dire that it deserves to be called a ‘depression’—a pandemic depression.” Like other global economies, developing and developed, India is also in an undeniable state of pandemic depression, especially given the pre-existing structural faultlines in the nation’s economy, its vast informal labour sector, and sluggish consumer demand.

The government’s failure to recognize the severity of a depression and obtuse reticence is absurd but unsurprising. Given the history of the Modi government to spin failures—the devastating and reckless demonetisation of 2016, the mishandling of Kashmir, and foreign-policy faux pas—as political successes, it sustains the illusion that it can ‘do-no-wrong.’ Troubling financial forecasts and COVID numbers are buried under sensationalised bollywood gossip and sectarian incitement by a puppeteered media machine, as the ruling government continues its ‘distract and rule’ policy. The Reinharts, in their Foreign Affairs piece, attribute economists’ indecision to deem the crisis a depression to the dire images and alarmism invoked by the memory of the global Great Depression. However, it would not be hyperbolic to say these dire images are far from the reality of COVID-struck India. The lockdown has devastated livelihoods and spurred starvation in states like Bihar and Jharkhand. The World Bank estimates that the pandemic will relegate 12 million Indians to a life of extreme poverty, living on less than $1.90 a day. As Jean Dreze, the Belgian-born Indian developmental economist, contends in the Scientific American, “In its hurry to turn India into a viswaguru (world leader), the Modi government seems to have little patience for a humanitarian crisis. Yet denying a crisis is the surest way to make it worse.” 

By actively misrepresenting the depression as a minor hitch, the finance ministry peddles baseless optimism, rationalizes passivity, and impedes policy making. By stalling, India risks losing its footing as a rapidly growing, developing economy, Indian firms risk forfeiting their competitive advantage, and Indian workers risk their job stability and livelihoods. The only thing more frightful than active ignorance is the active ignorance of a concurrent pandemic, humanitarian crisis, and economic depression.

There is one harsh truth Prime Minister Modi, the finance ministry, and the Indian populace need to grapple with. India finds itself in a severe economic depression, a consequence of a global pandemic accelerating the slowdown of an already declining economy. Recovery will not be easy, especially if the powers-that-be refuse to address the emergency and supplant systemic and evidence-based solutions with financial window dressing and passing the onus on God’s actions.

We can only begin to recover by recognizing the crisis for what it is, an unprecedented depression.


What’s in a name? That which we call a depression

By any other name would be ignorant, reckless, and disconcerting wordplay.

Bilal Moin is a first year in Grace Hopper College. You can contact him at