Jobs lost to the pandemic may not be retrieved soon: Economic Survey
The jobs lost to the pandemic may not be retrieved soon, the Economic Survey tabled in Parliament on Friday says.
The document says the lockdown disrupted local, regional and global supply chains and hit economic activity and the demand for consumption. It warns against falling into the trap of low wage growth and favours stimulating the economy through public investment packages.
According to the document, the lockdown led to a lowering of demand in two ways: through disruption of the labour market, which affected household incomes, and through the precautionary motive to save arising from the uncertainty amid the health crisis.
“As argued above, the Covid-19 pandemic has created a significant negative shock to demand. The various costs of financial distress that firms face even before potential bankruptcy… combined with possible firm bankruptcies in a choked bankruptcy system, on the one hand, and the possibility that jobs lost during the lockdown may not get fully retrieved, on the other hand, create the possibility of economic hysteresis that must be avoided at all costs,” the report says.
The survey has not provided data on the job losses, but multiple agencies have. Prominent among them is the Centre for Monitoring Indian Economy, which says India lost a third of its white-collar jobs in the four months from May to August last year. An estimated 59 lakh jobs were lost during this period.
“If we fail to stimulate the economy, we risk the temporary weakness in demand leading to lower potential growth,” the report says.
It advocates multi-year public investment packages that would contribute to lifting the growth expectations.
“At a time of excessive risk aversion in the private sector, which is characteristic of any economic crisis, risk-taking via public investment can catalyse private investment and unleash a virtuous circle,” the report says.
“It will crowd in private investment, rather than crowd it out. Second, there is a risk of the Indian economy falling into a low wage-growth trap, as has happened in Japan during the last two decades.”
Several academics have favoured more public spending on social welfare and infrastructure to stimulate the economy. Labour economist Santosh Mehrotra has suggested transferring money to poor households apart from investing in infrastructure.
“To revive India’s growth story and to cash in on our rapidly closing demographic dividend window, essential features must be included in the Budget 2021,” he said.
“This includes an increased expenditure in infrastructure and the health sector and an urban employment guarantee. There should be a minimum income guarantee of Rs 500 per month to poor households.”
The Economic Survey suggests the government has a target of providing skill training to about eight lakh people, including migrant workers, under the Pradhan Mantri Kaushal Vikas Yojana 3.0.
The migrants workers were among the worst sufferers of the suddenly announced lockdown, left without jobs and money and with many of them forced to walk hundreds of miles back home.