Impact of COVID-19 on Indian Economy and Labour Force
The outbreak of COVID-19 has hit all sectors of economic activity such as aviation, retail, tourism, capital markets, MSMEs to an extreme end. India, which is known as non-stop buzzing, came to a sudden pause when the lockdown was imposed throughout the nation. The multi-sectoral impact of COVID-19 was beyond our imagination and estimated economic recovery is not looking too smooth to forecast. The worst part is that the crisis is not over and it may cause a negative chain reaction in the years to come.
Let’s discuss the Impact of COVID-19 on Indian Economy and Labour Force.
It is to be noted that India already was passing through a pre-pandemic economic slowdown, the Covid-19 has just magnified the existing deterioration.
India is heavily groaning with the fall of demand or in form of consumption and investment, resulting in contraction of different levels of supplier networks. The world trade has been disrupted either in exports or be it in imports which eventually declined the government revenues in the sizeable margin.
The global labour market was already experiencing radical changes over the last few decades. The process of industrial relocation in Western countries and technological revolution are the two driving force behind the global radical change in labour work-force environment.
‘COVID-19 and the world of work: Impact and policy responses’ A report was published by the International Labour Organization (ILO). The report revealed how the pandemic negatively hit not only supply but also the demand across the globe.
As soon as pandemic crippled all the sectors, millions of labours were thrown out of the companies, the crisis deepened and resulted in the exodus of migrant labours on foot in search of food and shelter.
Some forward-looking policies were expected to save migrant labours from this crisis. But instead, states like Madhya Pradesh, Uttar Pradesh utilized the pandemic opportunity and curbed several labour rights by diluting the existing labour laws and started to inflict more pains to the vulnerable sector.
The pandemic simply exacerbated the economic inequality and social exclusion of vulnerable migrant labours.
The agricultural sector is the only one which showed a positive growth amidst the pandemic. However, due to logistics shut down tea estate was hit exorbitantly. States are opting for contract farming and the farmers are being encouraged to enrol in PM-KISAN scheme.
Manufacturing facilities and factories of manufacturing giants like
Tata Motors, Larsen and Toubro, Bharat Forge, UltraTech Cement, Grasim Industies, Aditya Birla Group etc decided to stop production during lockdown. The initial hit is still resonating and haunting Indian manufacturing sector even after six months of lockdown. Sustainable recovery is still a castle in the air for the manufacturing sector.
Ever since COVID 19 hit, share markets are under constant threat as uncertainty prevails. lt has experienced never-witnessed downfall since the Global Financial Crisis of 2008. Few sectors like hospitality, tourism and entertainment sectors have been impacted severely.
According to a report published by the National Statistical Office, India’s unemployment rate is at 45-year-high of 6.1% during 2017-18. The pandemic has further widened the figure. The unorganized sector is the worst-hit section, where the employees were thrown out in the name saving company’s revenue.
There is post-pandemic growing stress in the banking sector along with the rising burden of NPA. RBI has emerged with liquidity injection reforms along with an internal working group (IWG) report which recommended significant changes to the ownership structure that currently governs in banks. This would allow corporate entry into the banking system paving the way for privatisation move of some Public sector Banks. Potential solvency risks are looming large in the banking sector. The crisis of PMC bank or Laxmi Vilas Bank is just the tip of an iceberg.
- Government of India has launched Aatmanirbhar Bharat Abhiyan along with RBI’s liquidity injection reforms eyeing to turn the crisis into opportunity. It is an excellent initiative to boost foreign direct investment and technology transfer. The initiative also will promote ‘Made in India’ products in global market.
- RBI and the Government of India have come up with a set of reforms such as reductions of repo rate, regulatory relaxation by extending moratorium and several measures to boost liquidity in the financial network. Nevertheless the issues like payments deferrals, subdued loan growth, rising cases of bad loans will remain as a major hindrance in the economic recovery.
- Government of India must launch farsighted initiatives to fuel the lifelines to businesses by extending loans and tax waivers to small businesses and the self-employed persons.
- Direct support is the need of the hour for severely affected industries.
The pandemic has brutally exposed and amplified existing vulnerabilities in the Indian economy. A global recession is inevitable, India is no exclusion of it’s ambit. If there is no timely action to counter the unparalleled economic blow, it may further increase inequality, discrimination and unemployment in a country like India with fragile economic and fabricated social structure.