NEW DELHI: The need for the government to announce a major economic package with cheques for the millions of locked-down informal sector workers is increasing, as rough calculations of the loss of GDP and livelihood on account of the coronavirus (Covid-19) pandemic have started coming out.
British Brokerage Barclays estimates that up to Rs 9 lakh crore could be lost due to the Covid-19 impact and the lockdown, and has revised India’s GDP growth forecast to 3.5 per cent from an earlier 5.2 per cent.
“Large parts of the manufacturing (15 per cent of GDP), transport (5 per cent of GDP) and retail, leisure and recreation sectors (6 per cent of GDP) will grind to a halt. A three-week shutdown of these sectors would on its own take 1.5 percentage points off the annual GDP this year,” Shilen Shah, senior India economist at Capital Economics, said in a note.
Though M Govinda Rao, former member of the PM’s Economic Advisory Council, termed the calculations as “speculation, given that we do not have hard data”, he admitted that the cost to the economy would be “huge” and mostly to the informal and small scale sector “as there is a huge supply chain disruption and reduced demand.”
Rao advocated that cash handouts be paid into Jan Dhan accounts of all informal sector workers, besides free food rations given through state governments. “The need of the hour is to save lives and livelihoods,” he told TNIE. Estimates for such a cash transfusion vary, but range between Rs 60,000 crore and Rs 2 lakh crore, with CII estimating a transfer of Rs 2 lakh crore as required to help people out.
Some 87 per cent of India’s workforce is employed in the informal sector either as workers or self-employed, and their earnings are in jeopardy due to the lockdown.
“This is a bigger problem that the 2008 global financial crisis … When the lockdown is over, the next challenge will be to save small firms from bankruptcies,” Rao said.
Among others, former finance secretary Subhash Chandra Garg has advocated a Rs 1 lakh crore Emergency Working Capital Facility for small businesses whose losses on account of the shutdown and the slowdown could lead them to collapse. “Relief especially for poor is needed now. After the pandemic deaths, we don’t want deaths due to lost livelihoods, Rao said.
Covid-induced slowdown
Barclays estimates that up to Rs 9 lakh crore could be lost due to the Covid-19 impact and lock-down, and has revised India’s GDP growth forecast to 3.5% from earlier 5.2%. Analysts expect large parts of the manufacturing (15%of GDP), transport (5% of GDP) and retail, leisure and recreation sectors (6% of GDP) to grind to a halt.