ECONOMIC IMPACT TO VARY IN SECTORS

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Focus: GS-III Indian Economy

World Bank expects India’s gross domestic product (GDP) to contract by 3.2% in 2020-21.
There will be a moderate recovery to 3.1% growth in 2021-22.
This means that 2021-22 GDP will be less than what it was in 2019-20.

It can be expected that at least two sectors; agriculture and government, will not see a contraction.
In 2019-20, these two sectors had a share of almost 30% in total Gross Value Added (GVA), which implies that the economic downfall will be far more severe in the rest of the economy.
The non-farm, non-government economy contains many sub-sectors. A contraction in each sub-sector will have different impact across states and jobs.

-Construction sector has less than 10% share in GVA in 2018-19, however, The Employment share according to Periodic Labour Force Survey (PLFS), was 12%.
So, for an equal value of loss in output, job losses in construction would be far higher than in the financial sector.
Bailing out the construction sector can save a lot of jobs, and mostly of the poor.

A useful way to measure job losses during a contraction is by using what is referred to as employment elasticity of output in economics.
It is equal to the change in number of jobs per unit change in economic output.
The concept captures the idea that for the same amount of growth, job creation varies across sectors.
This also means that job losses during a contraction phase will vary across sectors.

There is a major blind spot for policymakers in tracking consumption trends.
India does not have a consumption expenditure survey (CES) after 2011-12. This will be a decade-old in 2021-22.
After the 2008 financial crisis, there was a lot of uncertainty about job losses. India did not have high-frequency employment data.
Although, no the PLFS does collect employment data in each quarter of the year. However, the government has not been releasing the quarterly data regularly.

-Source: Hindustan Times