Niitya Ranjan
Jindal Global Law School
Introduction:
The outbreak of Covid-19 resulted in the most unexpected changes throughout the world. One of the major lifestyle changes made by everyone in India was the complete nation-wide lockdown. It affected people in a plethora of ways, from minor changes such as adapting to a new routine to large scale changes such as the impact of the lockdown on the economy of the country. The lockdown caused a sense of uncertainty towards the market since all factories were ordered to be shut. Apart from the rising unemployment rates that occurred as companies scrambled to cut off any extra costs to sustain themselves in an unpredictable economic environment, there was also a ‘lack of economic demand and energy’[i] This article delves further into the effects of the lockdown on Indian economy and the road ahead post the lifting of the lockdown.
Effects of Lockdown on the Indian Economy:
The nation-wide lockdown was implemented in India on March 24, 2020 and it resulted in a complete halt of economic activity. Official data released by the Ministry of Statistics and Programme Implementation, showed that the country’s economy had ended up contracting by 23.9% in the April-June quarter of the fiscal year. “It has been identified to be the worst decline recorded since India started compiling GDP statistics on a quarterly basis in 1996.”[ii] Different employment avenues which were considered to be labour intensive such as restaurants and dineries, real estate, construction, transport, air travel, manufacturing etc. faced a severe hit during this time as almost all economic activity ceased. One of the few sectors that managed to stay afloat was agriculture.
Another report presented by the UNCTAD (United Nations Conference on Trade and Development) stated that India’s GDP was forecast to contract by 5.9 per cent in 2020 and recover to 3.9 per cent by 2021. It also said that the “baseline scenario is a sharp recession in 2020” due to the lockdown measures, as it “brought many productive activities to a halt across the country.”[iii]
It also mentioned that while India’s GDP growth would rebound and recover by a decent amount by 2021, the result of the lockdown would be translated in the form of “permanent income losses.”[iv]
The most recent reports have indicated that India’s quarterly GDP growth has consistently fallen since Q4 of FY18.
When we closely analyse the effects of the lockdown on particular sectors of employment, which in turn help constitute the fabric of the country’s economy, it is observed that the labour sector is the most adversely affected sector due to the laws set under MGNREGA, 2005 (Mahatma Gandhi National Rural Employment Guarantee Act). This is because the sector is largely comprised of daily wage labourers and construction workers, who were not receiving any job/project opportunities due to the pandemic and the subsequent lockdown. As mentioned earlier, other sectors such as airlines, pharmaceutical manufacturers, supply chains, consumer good industries etc. also faced problems as companies struggled to stay afloat and many workers got laid off in an effort to save on expenditure. The NRAI (National Restaurant Association of India) ordered all eateries to remain shut till 31st of March 2020, thereby causing disruptions to the business of over nine thousand eating and drinking joints throughout the country. Even online food ordering platforms such as Zomato and Swiggy recorded a staggering drop of sixty percent in their orders amid the pandemic.[v]
The government announced multiple relief measures and plans to alleviate these growing issues. One of the first ones being stimulus packages aimed at bailing out the economy, with around 10% of the GDP- over Rs. 20 trillion– being administered. There are specific ideas which will be implemented with a focus on economic revival- including the direct cash transfer, providing and/or moratorium of the loans, and increasing the health expenditure.[vi]
Along with his message about self-reliance (Atmanirbharta), the Prime Minister of India has also stressed on the implementation of strengthening domestic production facilities and manufacturing, along with diversifying supply chains and relying less on external supply chains.
The importance of environmental policies has been recognised as they also play an important role in the economic setup of the country. The government has mentioned the need for ‘green recovery’ from Covid-19. It is considered to be critical as the economic stimulus that is directed at this recovery will contribute to positive changes such as establishing decarbonised societies.
Another key issue that has been highlighted is the financing required for renewable projects. “The continuous flow of finances has been the backbone for implementing several actions that have direct or indirect mitigation benefits. According to India’s NDC, as per the preliminary estimates, the country would need at least USD 2.5 trillion (at 2014-15 prices) for meeting climate change actions between 2014 and 2030 (Government of India, 2015).”[vii]
The government has already allotted high budget on power and renewables in 2020, along with supporting the off-grid solar and on-grind solar pump programmes (MERCOM, 2020). Consensus has shown that this budget is supportive of the renewable industry. Moreover, the government has set aside close to 2.5% of the annual ‘salary budget’ of each ministry which will be allotted ‘for capacity building as part of the National Training Policy (Government of India, 2015). This has been done with the aim of strengthening India’s actions in mitigation and adaption by upgrading the capacity of institutions and personnel in both national and subnational establishments. It can also be viewed as a way to open up more employment opportunities for the public. [viii]
Conclusion:
Thus, based on the statistics and data collected by various sources, the lockdown has had an adverse effect on the Indian economy. While the government has tried to implement measures to prevent these issues from propagating further and creating a more large-scale problem, whether they are effective or not is yet to be observed. Many sectors will continue to face losses in light of the pandemic- particularly those that involve heavy social contact, while some may adapt to the new circumstances and continue to sustain themselves. The policies administered by the government should be aimed at reducing the rising unemployment crisis, the mass exodus of migrant workers and the drastically changing GDP, among other pressing issues.
REFERENCES:
[i] Janardhanan, Nandakumar, et al. IMPACT OF COVID-19 ON JAPAN AND INDIA: Climate, Energy and Economic Stimulus. Institute for Global Environmental Strategies, 2020, www.jstor.org/stable/resrep24952. Accessed 14 Dec. 2020.
[ii] Singh K, “COVID-19 Has Pushed the Indian Economy Into a Tailspin. But There’s a Way Out.” (The Wire) <https://thewire.in/economy/covid-19-india-economic-recovery> accessed December 14, 2020
[iii] “COVID-19 Effect: Indian Economy to Contract 5.4% in 2020, Says UN” (Business TodayOctober 17, 2020) <https://www.businesstoday.in/current/economy-politics/covid-19-effect-indian-economy-to-contract-54-in-2020-says-un/story/416801.html> accessed December 14, 2020
[iv] “COVID-19 Effect: Indian Economy to Contract 5.4% in 2020, Says UN” (Business TodayOctober 17, 2020) <https://www.businesstoday.in/current/economy-politics/covid-19-effect-indian-economy-to-contract-54-in-2020-says-un/story/416801.html> accessed December 14, 2020
[v] Mukherjee et. al T, “Opinion: Impact of Covid-19 on the Indian Economy – ET Government” (October 20, 2020) <https://government.economictimes.indiatimes.com/news/economy/opinion-impact-of-covid-19-on-the-indian-economy/75021731> accessed December 14, 2020
[vi] Janardhanan, Nandakumar, et al. IMPACT OF COVID-19 ON JAPAN AND INDIA: Climate, Energy and Economic Stimulus. Institute for Global Environmental Strategies, 2020, www.jstor.org/stable/resrep24952. Accessed 14 Dec. 2020.
[vii] Janardhanan, Nandakumar, et al. IMPACT OF COVID-19 ON JAPAN AND INDIA: Climate, Energy and Economic Stimulus. Institute for Global Environmental Strategies, 2020, www.jstor.org/stable/resrep24952. Accessed 14 Dec. 2020.
[viii] Janardhanan, Nandakumar, et al. IMPACT OF COVID-19 ON JAPAN AND INDIA: Climate, Energy and Economic Stimulus. Institute for Global Environmental Strategies, 2020, www.jstor.org/stable/resrep24952. Accessed 14 Dec. 2020.
