Much of India is heading into a second wave of the Covid-19 pandemic. Delhi is already in the middle of its third. With infections on the rise and reports that the medical infrastructure is under pressure in many places, the conversation about re-imposing restrictions on mobility has begun to circulate. In fact, in some places like Ahmedabad, the authorities have already applied restrictions and partial curfews. In recent weeks, images of crowded markets and large-scale violations of social distancing rules have served as precursors to an increase in infections. Still, any decision to impose a blanket lockdown or even a partial shutdown of markets must take into account the importance of the retail and recreation sector to the economy and the persistence of post-lockdown distress in the sector.
Purchases have not yet reached pre-pandemic levels
While anecdotal evidence from crowded markets has suggested that both sellers and buyers have taken a full step on pandemic-related concerns, data from Google’s mobility trends shows that markets, especially those that deal with the nonessential, they have not yet recovered their foresight. levels of pandemic activity. Google has been providing data on community mobility for five categories: retail and recreation, supermarkets and pharmacies, parks, transit stations, workplaces, and homes as a percentage change from baseline. The reference value is the average value of the day of the five week period of January 3 to February 6, 2020. In India, only mobility related to food and pharmacy had entered positive territory until November 17, the latest period for which data is available. . While the retail and recreation sector reached its highest post-close value on Diwali eve, it was still 15% lower than the baseline scenario. In fact, a comparison with the United States and Brazil, the countries in first and third place in terms of total Covid-19 cases (India is second) shows that the retail and recreational sector may have suffered the most in India. The report from Delhi, which was seen among the busiest markets before Diwali, confirms the devastation of the tourism sector due to the pandemic (bit.ly/39kvlsLbit.ly).
The retail and recreation sector is the largest source of non-farm employment
How important is the retail and recreation sector in India? It is the most important source of livelihood outside of agriculture. Data from the Periodic Labor Force Survey (PLFS) 2018-19, the latest period for which data is available, shows that commerce, hospitality and restaurants had the highest share of employment after agriculture. Its share of employment across India was higher than that of construction and manufacturing. In cities, more than one in five jobs are generated by this sector.
Commerce is one of the relatively higher-paying mass employment sectors outside agriculture.
Getting people out of agriculture into paid jobs is India’s biggest economic challenge. The textbook case of economic transformation from an agrarian to an industrial economy has eluded India so far. The share of manufacturing industry in employment and gross domestic product (GDP) has been almost stagnant in India for the past decades. The share of the manufacturing sector in employment and GDP was 10.6% and 14.5% in 1993-94, the first year after 1991 for which employment figures are available from the National Office of Surveys by Samples (NSSO). This increased to 12.1% and 18.1% in 2018-19, the latest period for which data is available.
Construction and commerce have become the main source of non-agricultural employment in the post-1991 period in the country. The Reserve Bank of India’s KLEM (Capital with a K, Labor, Energy, Material) database captures this very well. In 2017-18, the latest period for which this data is available, these two sectors had a share of almost 40% of total non-agricultural employment in the country. However, unlike construction, where labor income has stagnated in real terms, commerce has seen an increase in income per worker over time. This underscores the importance of the sector in supporting massive income.
A new lockdown will deal another blow to the retail and recreation sector, which has not even recovered from the impact of the pandemic so far. Such disruption can create disruptions in both supply and demand in the economy. Most experts have been skeptical on the question of whether the recent economic recovery reflects sustained improvement or a flash of pent-up / festive demand. A blow to the sector, which is one of the largest sources of massive employment, will have an adverse impact on income and, therefore, on demand. At a time when inflation, especially in food, has reached alarming proportions, restrictions or closing of markets are sure to make things worse. It would be best if all options other than lockdown were explored before unleashing the most extreme step in the government’s pandemic playbook.
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