Page 10 - Issue 01

two reasons. First, pre-COVID-19, the economy was already slowing down, compounding existing

problems of unemployment, low incomes, rural distress, malnutrition, and widespread inequality.
Second, India’s large informal sector is particularly vulnerable. Out of the national total 465 million
workers, around 91% (422 million) were informal workers in 2017-18.

The economic shock has impacted both formal and informal sectors. The growth slowdown of the
Indian economy during the pre Covid-19 period was mostly due to insufficient growth of demand.
During the pandemic time, both demand and supply were affected. On the demand side,

consumption, investment and exports have been subdued. Domestic and global supply disruptions
have led to supply side problems in many sectors. There have been massive disruptions in global
production supply chains, tourism and trade.
The problem of twin balance sheet has been accentuated further with more stress in corporate and
financial sectors. The MSME sector has been badly hit by the reduced cash flows. In the banking
sector, NPAs are likely to increase for all the scheduled commercial banks, NBFCs (non-banking

finance companies) and micro finance institutions. The NPAs could be much more for retail loans.
There has been a disconnect between stock market and real sector performance. Agriculture is the
only sector which showed a positive growth of 3% to 3.5% in 2020-21

The lockdown has choked off almost all economic activity. But, the worst affected are the bottom of
the pyramid particularly the informal workers including migrants. In urban areas, the pandemic
has led to the widespread losses of jobs and incomes for informal workers and the poor. Estimates

by the Centre for Monitoring Indian Economy (CMIE) show that unemployment shot up from 8.4%
in mid-March to 23% in the first week of April. There are about 40-50 million seasonal migrant
workers in India. Media have broadcast images of hundreds of thousands of migrant workers from
several states trudging for miles and miles on highways. The shutdown has caused untold misery
for informal workers particularly the migrants who lead precarious lives facing hunger and

malnutrition. Lacking regular salaries or incomes, these agriculture, migrant, and other informal
workers were the hardest-hit during the lockdown period.

The second advanced estimates show that India’s real GDP would decline by 8% in 2020-21 as
compared to 2019-20. Some projections show the real GDP would increase by 10% to 11% in 2021-22.
If we look at the levels, the real GDP in 2019-20 was Rs.145.7 trillion while it is expected to decline
to Rs.134.1 trillion in 2020-21. Even if we have 10% growth, the level of GDP would be Rs. 147.5
trillion in 2021-22 – this is only 1.1% higher than the level of 2019-20.

According to CMIE, the employment rate is still 2.5 percentage points lower now as compared to
the level before the lockdown last year. Women lost more jobs and many were out of the
workforce. Inequalities increased in health care and education.

What is the response of the government?

The Central government announced a comprehensive economic relief package called the
‘Atmanirbhar (self-sufficient) package which had three components: (i) monetary actions; (b) fiscal
actions; (c) economic reforms. The announcements were made in the months of March, May and
November in 2020. The Centre and the Reserve Bank of India (RBI) have together provided total
fiscal stimulus of Rs. 29.87 lakh crore since the Covid-19 pandemic began. This amount is 15% of

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