For the Poor, the Road is Littered with New Roadblocks, Such as Unpaid Self-Employment Rather Than Rewarding Salaried Work

How did a once-in-a-century pandemic impact the Indian economy?

- Roshan Kishore

The most mechanical or rather dehumanized way to answer this question would be to say it triggered an annual economic contraction (of 5.8%)—the first in four decades—thereby derailing future economic growth to sub-par levels for a considerable period. (See Chart 1)

A more nuanced answer requires looking at the economic data in greater detail and flagging multiple trends which delineate the pandemic's economic impact across class, sectors, and various stakeholders in the Indian economy.

Even in the immediate aftermath of the pandemic, its disruption was not the same across sectors. Sectors such as agriculture did not face any lockdown-like conditions. Operations were almost completely uninterrupted. Contract-intensive services, meanwhile, suffered the most. This shows up clearly when one looks at the detailed break-up of Gross Value Added (GVA), which is GDP minus subsidies and taxes.

Agriculture had an annual growth of 4% in 2020-21 while the trade, hotels, transport, communication and broadcasting services part of the services sector contracted by a massive 20% that year.

Not all service-sector activities were affected equally. If one were working in the financial markets or with a software company, the pandemic caused very little disruption once companies figured out how to work remotely.

Both workers and companies made or lost their fortunes depending on how affected and disrupted their sector was by the pandemic. A relatively poorly paid IT professional who could switch to work-from-home was more likely to emerge from the pandemic with very little financial scarring, while a restaurant owner whose business was booming pre-pandemic but contingent on footfall, particularly in a tourist or business district, would have seen the business devastated.