Lockdown 2.0 relaxations will bring 1/3 of the economy back to life

NEW DELHI: New guidelines, which call for relaxing curbs on agriculture, export-oriented businesses, and some industrial and infrastructure activity away from urban centres, could kickstart the Indian economy to a limited extent, producing about 30-35 per cent of the country’s GDP during the period of extended lockdown, an expert said.

“The move will have a positive impact… we can say about 30-35 per cent of the economy will be back in production mode,” said Professor NR Bhanumurthy of the National Institute of Public Finance and Policy.

The first phase of lockdown to safeguard the country from COVID-19 had allowed only essential industries to function and retailers to sell just food, essential goods and medicines.

However, Ravi Srivastava, former member of the National Commission for Enterprises in the unorganised sector, said the “actual impact on the economy may be less – between 25-30 per cent – given that there would be exceptions and production would not be at full capacity.”

The guidelines for exemptions to the lockdown announced till May 3 allows manufacturers operating in rural areas, SEZs, export-oriented units, industrial towns and areas, besides IT and IT-enabled services and IT hardware firms, to reopen maintaining social distancing norms and providing hostels to workers.

It also allows agriculture and its support industries, plantations, food processing, jute mills and brick kilns to restart in a limited manner with restrictions. It also allows limited construction activity on roads, irrigation works and industrial projects.

“The phased manner of the exit from lockdown is welcome and provides a roadmap for economic restart after  May 3… With this advance guidance, industry would be able to better prepare for restart of economic activities,” said Chandrajit Banerjee, Director General, CII.

Exports account for about 19.4  per cent of India’s GDP, while agriculture contributes nearly 14 per cent. Opening up limited industrial activity and construction is expected to add more value.

“This will help in opening of about 80-85 per cent of manufacturing gradually and bringing exports and manufacturing back on track,” said Sharad Kumar Saraf, president of the Federation of Indian Export Organisations.

However, business chambers feel the Government needs to take more steps including allowing sale of IT and electronics hardware and allow the service sector that feeds it to be reopened, as also allow e-commerce companies to sell and deliver non-essential goods that it has in its godowns.

“If we ask industry or e-commerce to re-open up, we have also got to re-open its supply chain and marketing channels,” Bhanumurthy pointed out.