The impact of Covid-19 pandemic on the Indian economy

Prof Tanusree (left) and Lee

With the aim to further study the Indian economy, especially the development, challenges, and current issues experienced in India, a webinar titled “Impact of Covid-19 Pandemic on the Indian Economy” was jointly organised by UTAR Institute of Management and Leadership Development (IMLD), Division of Community and International Networking (DCInterNet) and Globsyn Business School (GBS), India on 2 August 2021 via Zoom and Facebook Live.

Invited to be the speaker was GBS Assoc Dean-Academics Prof Dr Tanusree Chakraborty. It was moderated by UTAR student Lee Hui Ying.

“Today, I will be sharing the impact of the Covid-19 pandemic on the Indian economy. In order to understand the Indian economy, it is very important to understand the heterogeneity and the cultural diversity of India. Only then, we will understand the impact of the Covid-19 pandemic on different sectors of the economy, the employment characteristics of India and the gig economy,” said Prof Tanusree.

“India is a country that has 28 states and eight union territories. India is the seventh-largest country in the world and also the second-most populous country. There are more than 19,500 languages or dialects spoken in India as mother tongue and nearly 121 languages spoken by 10,000 or more people in India. It has a population of 121 crores. There had been an increase of 47 districts for 61 sub-districts, 2,774 towns and 2,279 villages according to census 2011. The total cases of the Covid-19 pandemic are 3.14 crores. Out of this 3.14 crores, the recovery rate is around 3.06 crores while the death rate is 4.21 lakh,” Prof Tanusree added.

She said, “In India, 93 per cent of the total workforce is in the informal sector, without a secured contract, workers’ benefit and social protection.  Out of this 93 per cent, more than 16 per cent is in the unorganised sectors. The impact of the coronavirus pandemic on the Indian economy has been largely disrupted in terms of economic activity as well as human lives. Almost all the sectors have been adversely affected not only in terms of demand but also supply which have created a hindrance for economic growth.”

Explaining the impact of Covid-19 on different sectors, she said, “Millions of jobs and livelihood are now at stake as activities around the country came to a halt with no job or income. More than 15 million migrant workers either returned to their native villages or shifted to towns inside the cities since the state borders are sealed. So, migration plays one of the most pivotal roles, imposing a massive strain on labour supply.”

“The transportation of raw materials and finished goods across states was also severely constraint. The countries around the world had to close their national borders, bringing international trade and commerce to an abrupt halt. There had also been a complete lapse in consumption demand as millions of people stayed home and postponed their non-essential expenditure,” said Prof Tanusree.

According to Prof Tanusree, the overall magnitude of the impact will depend on the duration and severity of the health crisis that extends intermittent lockdown required in the different regions of the country and the manner in which the situation unfolds and the lockdown is lifted. The loss of the economy is already substantial.

She continued, “The most important sector is food and agriculture because agriculture is the backbone of the country.  Several state governments have allowed to transport foods, vegetables and milk. Online food groceries, however, are heavily impacted due to the unclear restriction on movement and logistics. The agriculture sector had less impact as it addressed the basic needs of the people.”

She mentioned, “The tourism and aviation sectors that contribute to our Gross Domestic Product (GDP) stands about 2.4 per cent and 9.2 per cent respectively.  Both sectors were hit significantly by the pandemic. The common consequences of the Covid-19 seem to hit these industries harder than the financial crisis of 2018. These two industries have been dealing with a severe cash flow issue since the start of the pandemic and are starting at a potential of 38 million layoffs which translate to 70 per cent of the total workforce. It is estimated that these two industries may incur losses for about 85 billion rupees due to travel restriction.”

In terms of the telecommunication sector, she shared that even before the Covid-19, the price war between service providers had already started. With over 1 billion connections as of 2019, telecommunication contributed about 6.5 per cent of GDP and employed almost 4 million people. During the pandemic, broadband usage increased abruptly by about 10 per cent. As more people work from home and with more than one million new connections, it has contributed positively to the economy.

“The pharmaceutical industry has been on the rise since the start of the Covid-19 pandemic especially in India; the largest producer of generic drugs globally. Now there has been a recent rise in the price for raw materials imported from China due to the pandemic and generic drugs are the most impacted due to the import disruption by the supply chain and the need for social distancing,” said Prof Tanusree.

She continued, “Another sector is oil and gas. The Indian oil and gas industry is quite significant in the global context. It is the third-largest energy consumer, only behind the USA and China and contributes 5.2 per cent of the global oil demand. However, the complete lockdown across the country slowed down the demand for transport fuels as auto and industrial manufacturing declined and goods and passenger movement failed. So this would result in an increase in price for the finished products because raw materials such as oil and gas are costly. This would create further pressure on consumers and there is a chance for inflation in future.”

In terms of the mining and quarrying sector, she shared that the sector witnessed its highest fall in the recent quarter followed by the manufacturing and the construction sectors.  As for the export and import sectors, she shared that in terms of loss as a percentage of absolute value for 2020, the export sector is going to lose by 9.4 per cent to 16.8 per cent and imports in the range of 10.6 per cent to 18.9 per cent. The potential fall of exports and imports is estimated at 15 and 23.6 per cent and the loss in export and import can be linked to the possibility of low competitiveness in slow global demand and depreciating rupees.

Meanwhile, she also pointed out some issues raised by each sector to understand their effects on the impact.

She then continued, “If you try to understand the employment pattern of India, you will find that the small and medium-sized enterprises (SME) play the most pivotal role. SMEs in India which absorb the second largest labour force after agriculture are not only strongly linked to the export sector but also heavily dependent on imports for their supply and production. Some of the industries that depend on imports such as the automobile and pharmaceutical will have to operate much below their capacity due to the lack of imports and intermediates. Furthermore, domestic lockdown affected both domestic demand and domestic supply, thus the SMEs are adversely impacted. We have to amalgamate all this micro-component.”

“According to the Central for Monitoring Indian Economy, the unemployment rate will be around 12 per cent at the end of May 2021 which translates into job lost by 1 crore people during the period due to the second wave of the corona pandemic,” said Prof Tanusree.

She also shared that the first wave of Covid-19 has pushed 23 crore people below the poverty line. There has been a rise of 15 per cent in poverty in the rural area and 20 per cent in the urban area as formerly salaried workers moved into the informal world either as self-employed or casual wage earners between late 2019 and late 2020.

Sharing about the Gig economy, she said, “Gig economy is multi-characterised by the prevalence of short-term contract or freelance. The Covid-19 pandemic has altered the way of business as many companies realised the advantage of remote working. The pandemic-inducted or induced-remote working has blocked the age-old scepticism over the efficiency and dependability of contractual or part-time employees and companies are very happy to hire gig workers. India’s gig sector is expected to increase to 455 billion US Dollars by 2024 and has the potential to expand at least a double fold. In another estimate, India is likely to have 315 million gig worker jobs by 2025. Now at present, India has a pool of 15 million freelance workers engaging in works across IT and HR designing. In addition, India’s workforce is growing by 4 million people annually, and most of them are young millennials. They are showing their interest to hire gig workers. Hence, it is important to research this issue.”

She then shared the impact of the Covid-19 pandemic on the education sector and said, “Thirty-two crore and more students have been affected due to this virus. The institutes were forced to make arrangements for online impartation of regulatory scheduled classes for their students so that they do not have to suffer loss in education due to this lockdown. The predominant feature in India is the government school and most of the students in the rural area or suburban area come from middle class or below the middle-class family. So after the pandemic, when the schools re-open, you will find a high dropout rate because they engage in unorganised sectors to live and sustain themselves. Food is our basic requirement. For those who are not able to afford their daily bread, education is a luxury for them.”

“However, there is a positive effect in the education sector called e-learning. Technological innovation gives us the drive to move further but since we have 23 crore citizens below the poverty line due to this pandemic, affording this technologically, advanced technology is not possible. In order to be sustainable in the future, we should expand our technological innovation base to those people who are not able to avail these technological advantages during the pandemic. Then only we can say that we are now in a stable situation where all the children are able to avail or they can afford education,” said Prof Tanusree. Meanwhile, she also extended her invitation to the participants to submit and present their papers in GBS’s upcoming International Management Conference which will be held in December.

Sharing her opinion on GDP, she said, “In order to understand the crisis we must first understand the GDP.  But if you ask me, I don’t rely on GDP or capital income because to measure the proper growth or the sustainability of the country, we should understand the indicator of human development. Although GDP plays an important role, GDP is not going to reflect the growth of the Indian economy properly because it is not so simple; focusing exclusively on GDP and economic gain to measure development ignores the negative effect of economic growth on the society such as climate change and income inequality. It is time to acknowledge the limitation of GDP and expand our measures of development so that it takes into account societies’ quality of life and understand the true story of a country which is very important.”

Prof Tanusree concluded her webinar by emphasising the importance of understanding the impact of Covid-19 on gender because of gender discrimination. Female and male is a biological segregation; gender is a social construct and the impact of Covid-19 on women is absolutely different in India due to the feminisation of poverty.  

The webinar ended with an interactive Q&A session. It was attended by 90 UTAR staff, students and the public.

Prof Tanusree completed her Masters and PhD in Economics from the esteemed Calcutta University. With over 16 years of experience in teaching and research, she has led several learning sessions with aspirants, in the field of Economics, Operations Research, Research Methodology, Statistics and Gender & Development. Prof Tanusree’s repertoire of work includes a number of published books, journals and articles where she has extensively contributed her knowledge on women’s economic empowerment in the present day. She has also been actively involved in events, seminars and conference proceedings of international repute. Prof Tanusree is a member of the Globsyn Research Cell and heads the vertical of Globsyn Management Conference and Globsyn Management Journal.

Click here to watch the full webinar.