Covid-19 is a special event that might have induced some structural changes in the economy.
India’s economy is recovering from the downfall caused by the coronavirus pandemic; however, there are some irreparable damages already done. Rs 1 lakh crore shock to final demand is likely to have a multiplier impact of Rs 1.5 lakh crore on the country’s GVA and employment loss of 60 lakh jobs during FY21, said a report by KPMG. The economy is expected to contract in the range of 1.1 per cent to 13.6 per cent, depending on the ‘U’, ‘V’. or ‘L’ shaped recovery in the coming months, the report added. Covid-19 is a special event that might have induced some structural changes in the economy.
Changes such as variations in consumer’s purchasing capacity and spending patterns; technological shifts in the production processes; changes in labour productivity; resource availability; and changes in environmental as well as the political landscape; are the structural changes that the coronavirus may have brought in the economy. Since the pandemic has led to a loss of jobs and disrupted global supply chains, there could be permanent changes in spending and production activities, the report further said.
It is also underlined that the net impact on output employment and growth trajectory of India would depend on three major factors. The extent of morbidity and mortality; duration of external and internal restrictions; and actual size and efficacy of fiscal and monetary policies introduced by the government are believed to be major determining factors.
Meanwhile, as lockdown hit India in late-March, most of the manufacturing units shut down, leaving thousands of migrant workers without work. While they marched back to their own states, the level of employment nosedived during April and May. Further, the industries also feared how soon the workers would return to work after they faced a setback during March and April. However, as the economy started to recover, the condition of jobs gradually improved. The unemployment rate stood at 6.51 per cent in the month of November 2020, according to CMIE. This is better than the unemployment rate of over 7 per cent in the pre-pandemic era.