Only 49-57% Economic Activity functional during lockdown: McKinsey

LOCKDOWN

Only 49 to 57 percent of India’s economic activity has been so far operational during the lockdown and 143 million to 186 million inactive non-farm workers, says a research conducted by McKinsey and Company.

During the lockdown in the past six weeks, India’s economy has functioned at 49 to 57 percent of its full activity level, by our estimates, said McKinsey in a report.

The report further revealed that the economic cost, though unavoidable in the initial stages of a lockdown, might not sustain in the longer run. It is becoming gradually clearer that COVID-19 will not end immediately; the economy will have to be managed alongside continual infection risks, possibly for an extended period. After reopening, some countries had to resume lockdowns in a bid to curb the rising infection rates, and India may be no exception.

The report also said that India’s intertwined supply chains are in need of a sharp targeted lockdown approach India’s manufacturing, labour, and distribution chains are intertwined across sectors and geographies, particularly in the wake of the Goods and Services Tax.

Six states (including Andhra Pradesh, Kerala, Maharashtra, and Tamil Nadu, which contribute to 30 percent of construction activity) heavily rely on migrant construction workers from other states. Bottlenecks in the return of migrants would affect building activity in such states.

The report estimates that half of all drivers appointed in the freight movement across the country come from just 14 districts. Restrictions on the movement of people from these districts due to lockdown could affect the ramping up of national logistics activity.

It also pointed out that economic activity is very limited in red-zone districts that are critical centers of production and consumption The Indian Ministry of Health and Family Welfare (MoHFW) has classified districts into red, orange, and green zones, based on multiple criteria.

On looking ahead and planning for contingencies, McKinsey said, “The future remains uncertain, and India will need to be ready for all sorts of eventualities. It would be wise at all levels of government to develop contingency plans based on scenarios of potential COVID-19 impacts”.

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