143-186 mn non-farm workers inactive during lockdown: Report

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SME Times News Bureau | 08 May, 2020
Only 49 to 57 percent of Indias economic activity has operated during the lockdown so far, with 143 million to 186 million inactive non-farm workers, according to a research by McKinsey and Company.

In the past six weeks, India's economy has functioned at 49 to 57 per cent of its full activity level, by our estimates, McKinsey said in a report.

That economic cost, though unavoidable in the early stages of a lockdown, might not be sustainable in the longer term. It is becoming increasingly clear that COVID-19 will not disappear immediately; the economy will need to be managed alongside persistent infection risks, possibly for a prolonged period. After reopening, some countries have needed to resume lockdowns in response to rising infection rates, and India may be no exception, the report said.

India's intertwined supply chains need a sharply targeted lockdown approach India's manufacturing, labor, and distribution chains are intertwined across sectors and geographies, particularly in the wake of the Goods and Services Tax, McKinsey said.

Six states (including Andhra Pradesh, Kerala, Maharashtra, and Tamil Nadu, which account for 30 percent of construction activity) rely heavily on migrant construction workers from other states. Bottlenecks in the return of migrants would affect building activity in such states.

The report estimates that half of all drivers engaged in freight movement across the country come from just 14 districts. Restrictions on the movement of people from these districts could affect the ramping up of national logistics activity.

It is pointed out that economic activity is concentrated in red-zone districts that are critical centers of production and consumption The Indian Ministry of Health and Family Welfare (MoHFW) has classified districts into red, orange, and green zones, based on multiple criteria.

The 130 districts classified as red-zone districts are some of the most urbanized and industrialized parts of the country. They account for some 41 percent of national economic activity, 38 percent of industrial output, 40 percent of nonfarm employment, and more than half of India's consuming-class households.

Within this set of red-zone districts, 27 districts that have relatively higher infection rates and are more urbanized account for roughly one-third of the economic activity. Finding methods of keeping these red-zone districts operational and safe would be critical in keeping economic activity sustainable.

On the potential reopening implications for economic activity and workers, the report says that based on district-level data on employment for more than 700 districts across 19 sectors, we estimate that only 49 to 57 per cent of India's economic activity has operated during the lockdown so far, with 143 million to 186 million inactive non-farm workers.

Economic activity on the ground may rise going forward, although reaching full potential would require considerable effort to boost local confidence in large swathes of the country.

On looking ahead and planning for contingencies, McKinsey said, "The future remains uncertain, and India will need to be ready for all sorts of eventualities. It would be wise at all levels of government to develop contingency plans based on scenarios of potential COVID-19 impacts".

India's economy will need to function alongside COVID-19 for a prolonged period. A well implemented, granular, dynamic, and locally driven lockdown- and restart-management capability while managing health risks is required. There is much at stake for Indiaein both lives and livelihoodsein getting this right, McKinsey said.