Lockdown 2.0 How It Impacts Ailing Economy

While partial opening of some sectors on April 20 raises hope, extended curbs will hurt as demand shrinks & wait for stimulus package gets longer the spread of COVID-19, in New Delhi on Wednesday.

- Nirbhay Kumar

The extended lockdown is set to cost the Indian economy up to Rs 17.78 lakh crore and mount the woes of sectors such as travel and tourism, manufacturing, auto even as partial opening of select sectors outside of Coronavirus hotspots from April 20 has kindled hopes.

A Barclays research estimates India’s loss of economic activity could be as high as $234 billion in the lockdown period, resulting in zero per cent GDP growth this fiscal. ICRA, however, expects GDP to shrink by 1% in FY21.

The Centre’s move to allow manufacturing across Special Economic Zones (SEZs), Export Oriented Units (EOUs) and units operating from rural areas is being seen as part of the strategy for a gradual exit from the lockdown. The Home Ministry order has also allowed manufacture of IT hardware and essential goods among a slew of other activities. While many companies engaged in manufacturing are exploring the possibility of opening their factories, they are discussing the plan with other players in the supply chain. However, options are limited.

MANUFACTURING

The industry’s demand for opening manufacturing — 80odd per cent of which is shut or operating at very low utilization — was unfounded and was rejected. Opening up manufacturing at a time when demand in most sectors has crashed between 50-90% would have been suicidal. It would have only locked up precious cash in producing goods which could not be sold as shops, showrooms and malls stay shut.

A Gurugram-based auto component supplier to Maruti said he can open factories after Maruti restarts. “It will take a couple of days to figure out what all production can be started. Unless the whole supply chain works, it is difficult to resume operations,” he said.