Impact of COVID-19 pandemic on labour supply and gross value added in India

Xavier Estupinan (), Mohit Sharma (), Sargam Gupta () and Bharti Birla ()
Additional contact information
Xavier Estupinan: International Labour Organization, New Delhi
Mohit Sharma: Collaborative Research and Dissemination, Delhi
Sargam Gupta: Indira Gandhi Institute of Development Research
Bharti Birla: International Labour Organization, New Delhi

Indira Gandhi Institute of Development Research, Mumbai Working Papers from Indira Gandhi Institute of Development Research, Mumbai, India

Abstract: This paper estimates the first order supply shock through labour supply reduction associated with the containment measures taken by the Government of India to control COVID-19 spread. We make use of two metrics to estimate the labour supply shock. The first metric is based on whether a worker is employed in an essential or a non-essential industry and second measures the extent to which a worker can perform the work activities remotely. For the latter, we construct a Remote Labour Index (RLI) following Rio-Chanona et al. (2020). Using PLFS (2017-18) we find that 116.18 million (25 percent) and 78.93 million (17 percent) workers were affected in Lockdown 1.0 and Lockdown 2.0, respectively, and are at risk of job loss. To get an extensive impact of COVID-19 pandemic on the labour market in India we carry out an in-depth analysis of labour supply shocks by employment status, industry level, and occupation. The expected monthly wage loss of casual workers and regular and salaried employees is estimated to be Rs. 33.8 thousand crores (in 2017-18 prices). Further, the loss in Gross Value Added (GVA) (at 2011-12 prices) is predicted to be between 13 percent and 19 percent during the lockdown period from 25th March to 31st May 2020. The y-o-y quarterly growth rate forecast of GVA (at 2011-12 prices) for Q1:2020-21 is expected to be between -4.6 percent and -8.8 percent, using the baseline model.

Keywords: COVID-19 Pandemic; Remote Labour Index; Labour Supply Shock; Gross Value Added; ARIMA Modelling (search for similar items in EconPapers)
JEL-codes: C35 C53 E01 E25 J21 J22 J24 J33 J38 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2020-06
New Economics Papers: this item is included in nep-lma, nep-mac and nep-ore
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Citations: View citations in EconPapers (4)

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