Aditya Hore
Mumbai: Amid speculation that the Centre could further relax from May 3 some of the restrictions imposed during the ongoing nationwide lockdown, India may face fresh challenges in major job-creating sectors once the government starts a phase-out of lockdown early next month.
The longer the lockdown, the costlier its resultant economic burden could be. According to a survey done by Barclay’s , a prolonged lockdown will cost the Indian economy up to $234 billion (nearly Rs. 18 lakh crore) as fresh problems in sectors such as travel and tourism, manufacturing and automobiles, surface with a partial opening of selected sectors in non-hotspot areas
It could also result in zero percent GDP growth this fiscal year (2020-21). Rating agency ICRA, however, expects the GDP growth to shrink by 1% in FY21.
The Centre’s decision to allow manufacturing in Special Economic Zones (SEZs), Export Oriented Units (EOUs) and units operating in rural areas is being seen as part of phasing-out the lockdown. The Home Ministry has also allowed the manufacture of IT hardware and essential goods, among other activities.
While many companies involved in manufacturing are exploring the possibility of opening their factories, they are discussing plans with other participants in the supply chain. Their options are, however, limited, industry watchers said.
Agriculture
This primary, unorganized sector accounts for nearly 70% of Indian workforce. With harvesting season for the Rabi crops in progress, this sector could resume its activities first of all. With the harvest starting on April 15 being close to 100% in Gujarat and 70% in Madhya Pradesh and Punjab now, the agricultural community is hoping to get a major fillip, including in supply chain, logistics and cold storage to reap fruits of its labour.
Learning from previous experience, the Centre could completely exempt this sector from prolonged lockdown from May 3. Consequently, the transport of seeds, fertilizers, and food grains would get priority through a green channel. But experts in the agricultural sector still fear delay in harvesting crops as policies defined by the central government remain yet to be properly implemented at the local level. Wheat harvesting, almost complete in many states, is yet to end in the major producing states of Haryana and Punjab.
Given that agriculture is the existential basis of two-thirds of the population, any negative impact of the prolonged lockdown can multiply the problems. Lower-income for farmers could translate into lower consumer demand, which could have a cascading effect on national economy.
Manufacturing
Industry’s demand for opening the manufacturing sector, 80% of which are closed or operating at low capacity utilization, was rejected. Opening up manufacturing at a time when demand in most sectors fell between 50-90% would have been disastrous due to increasing, unsold inventories. It would only have locked up precious money in the production of goods that could not be sold while stores, showrooms, and malls remained closed.
A Gurugram-based automotive component supplier for Maruti said it may open factories after Maruti restarts.
However, export-oriented plants may restart, as most international markets have not blocked exports, and entry and exit ports continue to operate with some restrictions.
Continuous process manufacturers whose factories have a less human intervention, may also take time. Steelmaker JSW, which exports almost 30% of its products, is going ahead with its plan to reopen manufacturing to serve the US and European markets. The Confederation of Indian Industry (CII) has said that export orders must be completed to maintain India’s export market share in the post-COVID period.
AVIATION
The passenger-free aviation sector has had a lifetime lease carrying cargo for government and private companies in India and abroad. Since the lockdown began on March 25, Air India, SpiceJet, Go Air and Indigo could operate only 600 cargo flights a day, as against their normal of 3,000 flights daily, including passenger flights.
The airline industry has already been pushed against the wall. The Sydney-based Centre for Asia Pacific Aviation Pty. Ltd. (CAPA) said recently that the combination of COVID-related travel restrictions and an economic slowdown is likely to result in the first quarter of FY21 as a virtual fading of Indian aviation.
TRAVEL/TOURISM
With all modes of transport suspended, the nationwide lockdown had a profound impact on the country’s travel and tourism sector. Prisons released many prisoners to avoid crowding of jails but many could not return homes due to the ongoing lockdown. Allowing public transport after the 21-day lockdown could have helped operators generate some money, but now they will have to wait longer. Travel and tour industry is a major job-creator.
Travel experts say the economic loss in this sector remains the biggest concern, and nobody knows how long it would take to recover even after restrictions are lifted. Many travellers would be initially circumspect to resume their tours and travels and follow the rules of social distance. Even mandatory restrictions, such as booking alternative seats, would be there hampering the long-awaited restart.
Recently, an airline, which had started bookings, was found charging multiple times the normal ticket rate as it booked only one passenger per row and left the row just behind or ahead empty!
