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Coronavirus in India: COVID-19 lockdown may cost the economy Rs 8.76 lakh crore; here's how

To assess the impact of lockdown, we not only need to take the 21-day shutdown period but the extra additional days of the operating cycle before a material or service can be back to operations

Hari Hara Mishra        Last Updated: March 28, 2020  | 13:15 IST
Coronavirus in India: COVID-19 lockdown may cost the economy Rs 8.76 lakh crore; here's how
The exercise is to find out the cost of the 21-day nationwide lockdown while the economy is on complete bed rest

India is now facing its greatest crisis since its independence. There is a 21-day lockdown to enforce self-distancing to prevent the spread of COVID-19 and flatten its growth curve. It is natural that in the process, the economy is on complete bed rest. The exercise is to find out the cost of this lockdown.

Take a look at the components of the Indian Economy-Gross Value Added (GVA) at Basic Price 2011-12, at current prices. To clarify, the relationship of GVA with Gross Domestic Product (GDP), GVA is defined as GDP+Subsidies on products-Taxes, and GVA generally is a better indicator for analytics.

Cost of lockdown

As can be seen from above, except for essential services like 2c above, electricity, gas, water supply and part of 3B, C and D relating to broadcasting, financial services (banking) and, public administration, defence, etc, all other sectors have been completely shut. The impact on agriculture, which is seasonal in nature, cannot be ascertained exactly.

To assess the impact of lockdown, we not only need to take the 21-day shutdown period but the extra additional days of the operating cycle before a material or service can be back to operations. While each sector has its own dynamics and different cycles, I have assumed at least one week for the organisation considering various factors of production- men, materials, capital to migrate to the production capacity. So effective loss is assessed at 28 days (21 lockdown +7 pre-operative period).

I have excluded agriculture and public administration in services from computation in disruptions in the above table. It is assumed that a few functional sub-sectors contained in the table above will have a nullifying effect on the disruptions in excluded sectors like agriculture, public administration, etc which cannot be quantified accurately.

Also Read: Coronavirus Lockdown II: How serious could the impact be on Indian economy and GDP

(The author is a policy columnist and commentator. Views personal and do not represent any organisation or Industry body he is associated with.)

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