Fri. Mar 29th, 2024
picture credits- BW business world

As it has been quite extensively reported, full-fledged lockdown can spell doom for the nascent Indian economy. Such claims are backed by the reports by rating agencies like Care Ratings which state that lockdown by even one state like Maharashtra can cost Indian economy around Rs. 40K crores.

Additionally it also has stated that the loss of economic activity will have a 0.32 percent impact on the gross value added (GVA) growth at the overall domestic economy level. Furthering this claim, Industry bodies on Wednesday stated that imposition of stricter lockdown in Maharashtra will help slow the transmission of coronavirus but it will deeply impact the state’s economy.

Maharashtra, the commercial capital of India, is the largest in terms of GSDP and has a share of around 15 per cent in GVA, followed by Tamil Nadu, Gujarat, Uttar Pradesh and Karnataka.

It is to be noted that on Tuesday, Maharashtra government had announced a 15-day statewide curfew from Wednesday amid the high  spike in coronavirus cases in the state.

Chairperson of FICCI Maharashtra, Sulajja Firodia Motwani stated that ‘We are certainly hopeful that this (restrictions) will help slow the transmission of the virus. However, the lockdown will have a deep impact on the state’s economy and FICCI Maharashtra will engage deeply with the stakeholders in the government to minimize the impact and smoothen out the implementation related issues,’.

How can lockdown affect the economy?

The Chairperson maintained that Maharashtra’s lockdown has a high potential to disrupt the demand and supply chains not only in Maharashtra but also around the country. This comes as Maharashtra, being a crucial economic state in India, supplies products all over the country and thus stringent lockdowns can disrupt the nationwide supply chains.  She stated, “On the supply side, many companies operating in Maharashtra are selling their products all over the country and extended disruption in their operation will create a negative impact on their customers”.

The closure of retail would impact the demand side, she said expressing hope that the lockdown should not be extended beyond April 30.

Also according to the Care Ratings, it has been stated that the limited five-day week model would disrupt growth of the non-services sector. It is to be noted that as movement of people has been curtailed to a large extent, overall consumer demand would also get impacted, affecting certain segments in manufacturing.

It has also been stated that lesser economic activity in other segments will also  emphatically affect the power consumption, and hence the overall production of electricity. This will directly affect the pace of construction which will slow down and will impact the new projects which will be either stalled or will not be taken up, thus the lockdown will have crippling effect on both the supply and demand side.

Industry body Association also maintained that it is consistently working with the Maharashtra government to mitigate the economic impact of its 15-day curfew, and urged all states to reach out to the most vulnerable sections of the industry, particularly in the informal sectors, with the best possible relief. The Care ratings report had identified certain sectors, which would be impacted immensely by the lockdown, they were namely- aviation, trade and hospitality.

The industry body stated that ‘We would continue to remain engaged with the central and the Maharashtra governments, in our efforts to mitigate the economic impact of the 15-day Janata Curfew in the state.” It further added that ‘We have also urged the federal and states to reach out to the most vulnerable sections of the industry, particularly in the informal sectors, with the best possible relief,’.

It further added that it has approached all the states and the Centre to provide liberal regulatory and financial forbearances for compliances.

Plan of action by Industry bodies

Coming up with a plan of action to mitigate the lockdown’s effect in the economy, the Industry body advised that fixed charges like electricity dues, lease rentals, license fees and other levies should be waived, to help businesses maintain continuity. It further suggested that restaurants, hotels, small eateries should be given financial support for retaining the manpower, while the formal sectors of the economy should be engaged for regulatory forbearances. This comes, as aforementioned, due to the fact that hospitality sector is the sector which is still recovering from the previous year’s lockdown effects and will need extra impetus and protection from the authorities to survive other Covid wave.

B Thiagarajan, chairman (western region) of CII, said the industry is abiding by standard operating procedures to ensure a safe working place for its workforce and also to ensure containment of the spread.

Thiagarajan stated that “Right from the beginning of the pandemic, CII has been involved in regular consultative meetings with the state government officials and also authorities at the district and municipal corporation levels to ensure that industry can operate without any interruption,”.

It is to be noted that CII has been consistently making a strong point in favor of continuing industry operations smoothly while abiding by the procedures for the workplace.

By Shivani Khanna

A woman who believes in equal rights and aspires to inspire people through her writings. I aspire to contribute to the economic world and society with diligence and thus being an economic advisor tops my career ambitions . I currently am pursuing Economic honours ( at undergrad level) from delhi university.