Job Losses in India Due to Coronavirus: It's Now Critical To Revive the Economic Activity

The lockdown stands extended till 17 May 2020. The effects of a prolonged lockdown have begun telling on the economy with businesses downsizing their workforce, startups shutting down, and job losses in India.

Growth outlook stands downgraded

The economy is contracting and a severe economic recession is in sight. The International Monetary Fund (IMF) has predicted that the global output will shrink by 3% in 2020 due to the global Coronavirus pandemic. When it comes to India, the country's growth estimate now stands at 1.9% for FY21 down from 5.8% in January 2020. The silver lining, however, is the optimism that the country's economy, along with China, will register growth whereas those of the other countries will contract.

Businesses cut jobs and salaries to stay afloat

Amid the retarded economic activity, businesses are taking measures to stay afloat during the crisis. They are re-prioritizing their activities and making strategies to cope with the dynamic economic environment. In a bid to streamline the cash flows, companies have put new product development on hold. They are focusing on selling more of what they already have. Reduction in salaries, perks, and overtime hours, as well as job cuts, are some of the other ways companies are now adopting to go lean in the wake of the crisis.

Unemployment rate spikes to 27.1%

The Coronavirus-induced lockdown has rendered many people jobless - 12.2 crores to be precise. Daily wagers and migrant labourers are the worst hit group. According to the CMIE (Centre for Monitoring Indian Economy), the unemployment rate soared to 27.1% for the week ending May 3, 2020. April 2020 registered an unemployment rate of whopping 23.52% as against 8.74% in March 2020.

Situation will likely worsen

Experts believe the situation is going to worsen further with daily wagers and those working in the unorganized sector being the first in line to bear the brunt. Those in the more secured jobs will get affected next. The numbers support this trend as the breakup of job losses in April 2020 included 91% labourers and traders, 18.2% entrepreneurs, and 17.8% salaried employees.

Red zones are the biggest economic activity hubs

Even those that are employed may not be able to return to active work any time soon as most of the hubs of economic activity currently lie in the red zone. These red zones house districts that are the most urbanized and industrialized in the country. According to McKinsey, the districts in the red zones account for nearly 41% of the national economic activity, 38% of industrial output, 40% of non-farm employment, and more than half of the country's consuming-class households.

Devise ways to open the red zones

There are 130 red zones in the country that also face the maximum restrictions in terms of lockdown enforcement and movement of the people. This translates into marginal economic activity and industrial outputs. Considering the contribution of districts in the red zone to the economic activity, it is critical to devise ways of opening them up as soon as possible, as further delays will only worsen the economic crisis and impact the livelihood of millions of people.

The article has been written by Neetu Katyal, Content and Marketing Consultant

She can be reached on LinkedIn.