The 21-day nationwide lockdown will have far-reaching implications on the economy and Indians must brace themselves for an acute economic slowdown, if not a contraction, in the coming April-June quarter of the new financial year. The scars will start appearing only after the lockdown period.
Companies have already started redrawing their plans relating to operations and human resources. Even as the government issued an advisory to India Inc urging it to refrain from cutting jobs and salaries, it may not be easy for companies to sustain at the present levels. So brace yourself for tough times with salary cuts, no increments, and withdrawal of several benefits such as insurance. The unorganized sector—engaging over 75 per cent of the country’s workforce will be the worst impacted.
The loss and uncertainty are difficult to quantify at this point. Many think-tanks and rating agencies have already slashed India’s growth projections. The Reserve Bank of India did not come up with any growth projection, saying that it was difficult to predict anything at this point in the wake of this unprecedented situation with the spread of the COVID-19. A State Bank of India report suggested that the total cost of the lockdown could be Rs 8.03 lakh crore, which is a lot of money. In 2019-20, India’s gross domestic product in absolute terms was about Rs 148 lakh crore.
The situation is unlikely to return to normal anytime soon. Even if India decides to end the lockdown period on April 14, it will not be in any position to resume economic activities especially in sectors such as aviation, trade, tourism, and micro small and medium enterprises (MSMEs) immediately.
The Centre has announced a Rs 1.7 lakh relief package under the Pradhan Mantri Garib Kalyan Yojana for the poor and underprivileged but the benefits are not reaching those who are eligible and need it.
The RBI also announced a slew of measures, leading to an additional liquidity injection of Rs 3.74 lakh crore into the system—nearly 2 per cent of the GDP. These moves will definitely help in easing the situation but clearly will fail to pull the economy out of this unprecedented slump.
The spread of the killer coronavirus has taught a few important lessons to India. Along with putting immediate and urgent measures in place to rescue the economy in the short term, the government must look at long term and systemic plans such as boosting the Make in India programme, which is yet to take off. That apart it is imperative to reduce over dependence on imports of goods and improve healthcare infrastructure in the country.
Needless to say, the lockdown has posed the worst challenge to the country’s poor, many of whom are dependent on their daily wages. The government must ensure that the lives and livelihoods of these people are protected at all times. While the Narendra Modi government got kudos for taking timely action by announcing a nationwide lockdown, it will soon lose the goodwill if the poor continues to face unparalleled physical, emotional and economic trauma..