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How Vulnerable Is India’s Workforce To Lockdown? Crisil Estimates

Crisil picks sectors and services most vulnerable to job losses.

Workers stand in line to scan their fingerprints as they sign out at the end of their shifts at the Rungamattee Tea & Industries Ltd. Chandighat Tea Estate in Cachar, Assam, India. (Photographer: Nicolo Filippo Rosso/Bloomberg)
Workers stand in line to scan their fingerprints as they sign out at the end of their shifts at the Rungamattee Tea & Industries Ltd. Chandighat Tea Estate in Cachar, Assam, India. (Photographer: Nicolo Filippo Rosso/Bloomberg)

Manufacturing and construction, the biggest employers among industries, are the most vulnerable for job losses, followed by accommodation and food services, as the lockdown to contain the Covid-19 pandemic has disrupted economic activity, according to Crisil Ratings.

Industrial workforce is expected to see the highest job cuts because of the restrictions, the research and ratings company said in teleconference while releasing the report. The services sector is likely to witness a medium impact and agriculture will be least affected, it said.

While India lacks an official index on jobs, Centre for Monitoring the Indian Economy has estimated India’s unemployment rate at 29.4 percent in rural areas and at 25 percent in urban areas for the week ended April 26 as lack of movement of manpower and goods froze the economy.

Bulk of the job losses in India’s workforce will be largely in the informal sector that employs about 90 percent of the 46.5 crore active working population, according to Crisil. This includes casual labourers, majority of the self employed, and part of regular wage or salary earners working on contract in the organised sector.

How Vulnerable Is India’s Workforce To Lockdown? Crisil Estimates

Crisil based the estimates on the periodic labour force data and the vulnerability of each sector to the pandemic.

Though agriculture employs almost four times the informal workers than construction, it is likely less impacted because it’s an essential activity, said Dharmakirti Joshi, chief economist at Crisil, adding that the farm economy also received support under the PM-KISAN cash handout scheme.

While manufacturing and construction are expected to be hit hard, Crisil said the impact on utilities like water and electricity is likely to be lower. Among services, transport, accommodation and food services, also big employers, is also estimated to see significant job losses as demand has fallen.

Several states have issued advisories against termination of employees or reduction in salaries. That, however, is unlikely to provide relief given the scale of economic shutdown. While the government has announced relief for the poor and advised states to pay construction workers from a pool of cess, it is yet to announce any stimulus for businesses.

Crisil’s base case pegs India’s GDP growth rate at 1.8 percent in FY21, with risks tilted towards the downside of zero. Joshi said domestic indicators continue to worsen though external vulnerability remains low.

Joshi estimated that the economy would suffer a permanent loss of around 4 percent of the real GDP, considering that the fiscal space remains constrained though monetary policy has been supportive.

Also Read: India’s Fiscal Past May Come Back To Haunt It During Covid-19 Fight

Fiscal policy will need to be flexible and responsive, said Joshi, including a top-up of welfare measures to address household income disruptions of the vulnerable, and more support for businesses, particularly the small and medium enterprises.