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

Author

Listed:
  • 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)

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.

Suggested Citation

  • Xavier Estupinan & Mohit Sharma & Sargam Gupta & Bharti Birla, 2020. "Impact of COVID-19 pandemic on labour supply and gross value added in India," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2020-022, Indira Gandhi Institute of Development Research, Mumbai, India.
    • Handle: RePEc:ind:igiwpp:2020-022
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    File URL: http://www.igidr.ac.in/pdf/publication/WP-2020-022.pdf
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    Citations

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    Cited by:

    1. Mohit Sharma & Brinda Viswanathan, 2022. "Minimum Wages in the Presence of Wage and Non-Wage Sectors in India: An Exploratory Analysis of the Non-Farm Sector," Working Papers 2022-225, Madras School of Economics,Chennai,India.
    2. C Vijai & P Nivetha, 2021. "A Study of Stress Complications among Employees during Covid-19 Pandemic Special References to Chennai City," Shanlax International Journal of Management, Shanlax Journals, vol. 8(3), pages 37-45, January.
    3. Anuradha Patnaik, 2022. "Measuring Demand and Supply Shocks From COVID-19: An Industry-Level Analysis for India," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 16(1), pages 76-105, February.
    4. Lauren Hoehn-Velasco & Adan Silverio-Murillo & Jose Roberto Balmori de la Miyar & Jacob Penglase, 2022. "The impact of the COVID-19 recession on Mexican households: evidence from employment and time use for men, women, and children," Review of Economics of the Household, Springer, vol. 20(3), pages 763-797, September.

    More about this item

    Keywords

    COVID-19 Pandemic; Remote Labour Index; Labour Supply Shock; Gross Value Added; ARIMA Modelling;
    All these keywords.

    JEL classification:

    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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