Page 2 - newsletter 14 aug
P. 2
The Coronavirus Editorial:-
With a decline in income-elastic employment in
Economic Impact
manufacturing/industrial and services sectors and
thus greater outflow of migrant labour, it results in
Shirish, XII
reversal of historical trends of structural
The emergence of the pandemic and the ensuing
national lockdown from March 24, 2020 has, transformation with more labour being engaged in
through its varying extensions and forms, brought subsistence agricultural and related activities in
about an external shock to the Indian economy, the rural sector, as indicated with an increase in
worsening the rate of demand-side deceleration monthly agricultural expenditure along with a
already prevailing in the market into a recessional corresponding increase in budgetary allocations to
contraction in real annual GDP indicators, with MNRGERA. This however may facilitate the
foreign or export-oriented businesses in sectors formation of an ex-post low income
like tourism, services, EOU manufacturing, etc. equilibrium, driven down by a vicious cycle of
being the first and most severely impacted. low savings resulting in low investment
It seems that the lockdown carries no silver linings, causing lower demand.
as disruption in supply and logistical chains is Thus, the absence of knowledge as factor of
not only causing an increase in per unit cost of production due to labour unavailability forcing
operations at the time of stressed balance force majeure collapse of supply, skyrocketing
sheets but also introducing lapses in retail or unemployment levels, declining sources of income
consumer-facing functions of firms, especially in causing increased consumer expenditure on
essential goods and services. Moreover, a demand inelastic goods from dwindling savings,
contraction in supply, now compiled with deficient technological obsolescence and lapses in
demand and an executive ordinance ordering digitalisation and monetary measures focusing on
halting of operations, has resulted in an extensive liquidity despite a high fiscal deficit and increasing
decline in both disposable incomes and CPI inflation are simply some of the reasons as to
employment levels due to mass furloughs , with why India registered the worst Manufacturing
most workers relying on minimal savings or Purchasing Managers Index (PMI) rating of
dissavings to meet autonomous expenses. 27.5 in 15 years, with a rating below 50
indicating contraction.
Despite the deployment of Keynesian governmental
measures in the fiscal and monetary policies,
especially the 20,000 crores Rupees Atmanirbhar
Bharat campaign, the informalization of the Indian
economy in both its dependence on smaller private
MSMEs and its associated unprotected workforce
prevents such measures from having actual
grassroots effects for the most part, as the normal While the restrictions placed may be pursuant of
transmission mechanism of commercial banks protection of public interest, the status quo of
and financial institutions is broken, due to underutilization of Indian human resource is
decapitalization and poor risk management. As unsustainable if normal business activity is to be
for the informal workforce, without any social restored, in whose end both private and public
security, rights to unionization or minimum wages, enterprises must endeavour to adapt to the
94 per cent of the labour force is susceptible to transient difficulties.
unfair layoffs without governmental coverage.
