India Inc. back to pre-pandemic levels?

After the second wave India Inc. should be expecting a faster than expected recovery as the economic news coming out is encouraging. The pace of business resumption crossed a milestone in mid-august, tracked by Nomura India Business, rising above 100 – the pre-pandemic level for the first time since the covid struck last year. Although the news is encouraging we won’t be seeing swifter than expected rebound in jobs.

Pandemic affect on jobs?
There is an absence of timely jobs data due to which getting the exact scenario of the employment situation in India is difficult. But from an outside look one can give an analysis that workers in India have suffered an uneven hit because of covid.  

The covid 19 pandemic’s impact was disproportionate in jobs market just as it was on growth. The drastic shift to work-from-home depended upon sector-to-sector where shifting to wfh was easier in IT, software and finance related jobs it was difficult in more contact-intensive jobs and nigh impossible in jobs such as manufacturing, construction, restaurant etc.
Starting from informal sector the most adversely affected people are self-employed and daily wage workers and have been hit worst. Moving on to the the sector which employs the most the micro, small and medium enterprises (MSME) have been hit harder than big firms. Such kind of impact is called a K-shaped impact.
The slack in the labor market is often used to measure unemployment in the labor market. This is measured by the Centre for Monitoring Indian economy (CMIE). The rate which stood at 8% mid-August which was a slight bit higher than pre-pandemic level of 7.8% in February 2020. Although this may as well be an understatement .

A decrease of 6 million workers was seen, data reveals as total employment was 406 mn back in February 2020 which is currently down to 399.4 mn in July 2021.Data is much more saddening when we talk number of workers who dropped out of workforce a staggering 10.9 mn and are no longer actively seeking work and those who had jobs had to take wage cuts, work less hours or are on indefinite leave. Disguised unemployment has also risen with mostly migrant workers returning back to their villages and working on their farms.

Future of jobs in India.

One can take a breath of fresh air as data suggests that the imoact of second wave has declines and the economy has rebounded. As the rate of vaccination is progressing and people have started to adapt the most affected contact-intensive sectors such as resteraunts, construction etc.

Job market recovery will have to be a slow and a gradual process due to two underlying reasons.Vaccinating majority of population is going to take a lot of time and will not happen atleast till end of 2021 and second as when the market recovers the firms would want to analyse the strength of demand before hiring and starting full scale production .

Obviously the pace at which different sectors come back will differ drastically and will depend upon worker-to-worker. The formal sector will have an advantage in this case as it is expected to bounce back faster than the informal sector. Starting with formal sectors the sectors with great demand will bounce back faster such as IT, software and pharma whereas more traditional sectors such as infrastructure, hospitality, real estate, media and entertainment may be slower to recover.
As with informal sector workers, it will take much longer than anticipated due to worker hesitancy of leaving homes due to the whole migrant worker fiasco and although this may subside over time the small industry that shut down aren’t likely to open up making such kind of  jobs gone forever.

Long term affect

Looking beyond the here and now, the pandemic may leave behind other long-lasting effects, while presenting both challenges and opportunities.
For example, the pandemic has accelerated the pre-existing trend towards digitization and e-commerce. Video conferencing is now widely accepted. Telemedicine, delivery and fintech are a few examples of sectors that have witnessed fast-paced growth during the pandemic. Supply chain relocations as firms adopt a China plus one strategy have opened up a new vista of opportunities for India to integrate into global value chains and to create new manufacturing jobs.
In contrast, business travel will likely decrease in a post-pandemic world. Meetings, incentives, conferencing, exhibitions (MICE) type of tourism will likely decline. Demand for commercial office space may be lower. Automation may reduce employment intensity of manufacturing, hurting low-skilled workers. The pandemic has resulted in more market concentration, as big firms become even bigger, while small firms are squeezed, which could hurt job creation.

In contrast, business travel will likely decrease in a post-pandemic world. Meetings, incentives, conferencing, exhibitions (MICE) type of tourism will likely decline. Demand for commercial office space may be lower. Automation may reduce employment intensity of manufacturing, hurting low-skilled workers. The pandemic has resulted in more market concentration, as big firms become even bigger, while small firms are squeezed, which could hurt job creation.

Required policy toolkit
These longer-term shifts will require an active policy response. Workers will need both reskilling and upskilling. We need an ecosystem for MSMEs to thrive. This includes less regulatory compliance costs, lower funding costs and ability to scale. More jobs will need to be created in the infrastructure and construction sectors. An ecosystem for startups to gainfully employ India’s youth is needed. Many other such new sectors that can create jobs have to be explored.

In short, reversing the pandemic hit to jobs is only a first step. The real jobs challenge still lies ahead.