May , 2020
Retention of Employment- Key to Revive the Economy
19:15 pm

Kishore Kumar Biswas

In the Covid-19 episode, the Indian economy has been shrinking. This means, due to almost complete lockdown, only a portion of the economy has been under operation. Therefore, rate of growth of the economy is negative. Meanwhile several forecasts by various organisations put forward their estimate of growth rates of different countries of the world, both developed and developing. Most of the organisations like the World Bank, Credit Rating organisations, are projecting less severe economic future of India and China. But they foresee negative growth of GDP of the developed countries in the FY 2020-21. But India should not be complacent by these estimates.


Indian economy is different from others

The special nature of the Indian economy is that it has the biggest number of people (both in absolute and comparative senses) in the unorganised sector. About 90% of the working population is in this sector. In this sector most of the people are vulnerable. Why is this so? They have no social security, regularity of employment, rules for the fixing wage rates, holidays, health facilities and other benefits. The whole of the agricultural sector, construction workers, workers in small and cottage industries, any form of casual labour, tribal and other uprooted workers, etc., are the main examples of the unorganised sector. In the present episode, baring a portion of the agricultural activity and some area of workers, almost all sectors have been non-functional. Therefore, crores of people are passing a phase of life-threatening period. The people have almost nothing as savings. So, job loss for them could lead to hunger. But government has come forward to supply them food elements at free cost.  But this arrangement is not enough for them.


Why retention of job is vital?

Retention of jobs of the jobless workers is not only to favour the job losers but actually to keep the economy running as it is necessary. Even the organised sector including big industry and service, cannot run unless unorganised sector starts to work. The basic macro-economic logic will make the matter clear. There are 3 categories of demand in economy. Consumption demand, Investment demand and Government sector demand. There is another category i.e., foreign trade sector (export-import). Out of these categories, Consumption category is the most important, responsible for about 65-70% of the economy’s total demand generation. At the same time most of the demand generated in the unorganised sector i.e., rural sector, construction, small scale industry, etc., mentioned earlier. So, to increase output or GDP, the share of demand for unorganised sector is crucial. Therefore, unless unorganised sector earnings rise, economic growth will not increase. So, the government has to take steps to run the sector by creating opportunity of employment generation. The unemployment rate is increasing day by day between lockdown period as the economy had been slowing down before lockdown. But after lockdown it reached historically lowest levels. But when some relaxation of lockdown was declared, a section of workers started working and rate of unemployment began to fall.

Unemployment situation ( in %)






22nd March




29th March




5th April




12th April




19th April




26th April




Source: Media Reports depending on CMIE


Now the question is, how far employment can be retained, at least at the pre-lockdown period. When the lockdown will be over, it is feared that a large number of production units in every sector, will not be able to re-open. So, the unemployment situation will remain very high even after the lockdown.

Role of the Government

As of now the Central Government has not announced any remarkable financial package to cope with the Covid-19. Centre’s `1.7 lakh cores is considered as no match for global response. Out of these, cash transfer to the target people, measures of food security, free cooking gas to the poor and insurance cover of `50 lakh to health care workers, are important. But this amount is very little compared to the economic damage that the country is going to face. It is only about 0.7% of India’s GDP. What about other countries? The U.S. has declared a stimulus package of $ 2 trillion or 2% of GDP, that of China has been 1.2% of its GDP. Italy approved 1.4% of its GDP only for health package. It has also approved hugely for economic package to business, workers and households. Brazil, Indonesia also have announced good amount. Every EU countries have approved many incentive plans to stimulate the economy.

What can be suggested?

Government has to take huge fiscal measures to retain the employment level as high as possible. Prof. Arun Kumar, Professor Emeritus, J.N.U New Delhi thinks (Economic and Political Weekly- April 4, 2020) of the government has political will economy can be revived to an extent after the lockdown will be over. Some of the measures according to him are very important. Ramping up of the healthcare infrastructure. This sector is very job intensive. Ensure public distribution of essentials is fulfilled. Basic necessities not to be limited to some food items. He is also suggesting income transfer to the poor in a transparent way. An opinion is always there that a large fiscal stimulus increases the inflationary situation. But Kumar believes that inflation will not be there as long as the economy is running at huge excess capacity. At present the demand lend is very low in the economy.

Anup Sinha, Chairman, Bandhan Bank and former Professor IIM Calcutta, thinks that the Government should take 3 steps now. First, it has to immediately declare a timeline regarding the withdrawal process of lockdown. This may be a tentativeone, because situation may change. But it has to announce its future plan. Second, the poor and vulnerable section must be paid some money regularly until and unless they get employment to earn their livelihood. Third, the Government must ensure undisturbed agricultural activities. To regularise the supply chain of agro outputs purchasecrops at MS prices etc., are important in one hand. On the other hand, government has to ensure supply of seeds and finance to the farmers. Banks have to come forward to supply finance in the agriculture sector for the coming rainy season.

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