Covid-19: Impact on the Indian Economy and Employment – Way Forward

Written By: S. Lingamurthy & Anandi Gunda


The present situation prevailing over the world has to be unmasked and the global pandemic named “Covid-19” across the World has been originated from the Wuhan Institute of Virology, China, and has enveloped the entire world impacting all major economies adversely in the fields of aviation, tourism, retail, education, automotive, restaurant, and oil and gas sector resulting in severe employee layoffs. Highly transmissible nature of this virus and its subsequent mutations are becoming a grave concern for the economic recovery process. A robust research and development effort around the world in the discovery of vaccines and inoculation of the people are easing the dangers posed by the pandemic. Post the first wave of the pandemic, a hesitant and uneven recovery started to take place from an unprecedented steep fall. Government of India and Reserve Bank of India calibrated stimulus intervention process into various sectors of the economy appears to positive recovery. However, a second wave caused by more lethal virus variants from March 2021 onwards has forced authorities to impose stringent lockdown procedures by all State Governments halted the economic recovery resulting in further fall in business activity and employment.


A cluster of cases of pneumonia in Wuhan of Hubei Province, China have been reported by Wuhan Municipal Health Commission. Eventually Covid-19 has been identified in December 2019 which was originated from Wuhan Institute of Virology, China. The World Health Organization (WHO) has declared Covid-19 as a pandemic on 11th March 2020 [1]. During the first wave of the pandemic, several European countries such as Spain, Italy, Belgium, France, Germany, and the USA bore the major brunt of the virus. United Kingdom authorities reported a SARS-CoV-2 variant to WHO in December 2020. The United Kingdom referred to this variant as SARS-CoV-2 VOC 202012/01 (Variant of Concern). On 18 December 2020, national authorities in South Africa announced the detection of a new variant of SARS-CoV-2. Later on, Covid-19 pandemic is continuously evolving, as mutations are taking place in the virus and the resultant severity of the virulence is constantly changing depending upon the type of variant and its structure. The proliferation of Covid-19 is not the same in all countries. Covid-19 outbreak of most affected countries for a 7-day moving average preceding 22nd June 2021 is presented in Figure 1[2]. A comprehensive database of the virus variants compiled by global initiative on sharing all influenza data (GISAID) sourced from genomic sequencing organizations of several countries is available [3].  According to a report by Nature and Indian SARS-CoV-2 Genome Sequencing Consortia (INSACOG), B.1.1.7, B.1.618, B.1.618 and B.1.351 virus variants are dominant in India which are further undergoing mutations [4]. The severity of the Covid-19 pandemic can be easily understood from Figure 2.

On the vaccine front; major methodologies employed for their development and manufacture are m-RNA, DNA, Viral vector, Protein based and inactivated virus. A pictorial representation of vaccines developed using these methodologies and their manufacturers are presented in Figure 3[5]. Currently, 82 vaccine candidates are under clinical development and 182 vaccine candidates are in the pre-clinical development phase [6].

In India, the first case of COVID-19 was reported in Kerala, among 3 Indian students those who had returned from Wuhan [7]. Kerala has announced first lockdown on 23 March 2020 followed by the rest of the country two days later. Recoveries in Covid cases exceeded compared to infected cases by June 10, 2020. Five of the highest industrialised cities accounted for around half of all reported cases in the country, Mumbai, Delhi, Ahmedabad, Chennai and Thane. Daily cases peaked mid-September with over 90,000 cases reported per-day, dropping to below 15,000 in January 2021 [8-10]. The country began a phased lifting of restrictions on 8 June [11]. This phased lifting of restrictions continued in a series of “unlocks” which extended into November 2020 [12]. Second wave of Covid-19 pandemic started from mid-March 2021 and rapidly spread in almost all big states in the country and is still ongoing. Stringent lockdown measures were re-imposed to tackle the worsening health care situation and to arrest the spread of the infection [13].  As the active infected cases started to fall at rapid speed, several states had started implementing the unlock procedures from the 2nd week of June 2021.

The National Expert Group on Vaccine Administration for COVID-19 (NEGVAC) was constituted in August 2020 to draw strategy for the vaccine deployment [14]. The Indian government provided around 65.5 million doses of covid vaccines to 95 countries between 20 January 2021 and late March 2021. 10.5 million doses were gifted while the remaining were commercial and COVAX obligations [15]. Based on the scientific data and experience from other nations and discovery of delta and delta plus variants, several scientists including the Principal Scientific Advisor to the Government announced that “Carona pandemic Phase 3’ is inevitable and not too far away [16,17]. As of 22nd June 2021, India has administered 28,87,66,201 vaccines with a world record of vaccinations of 8.5 million on 21 January 2021[18].

Impact on Economy and Employment in India

Stringent lockdown measures have seriously impacted the world economy as well as Indian economy causing adversely in the fields of aviation, tourism, retail, education, automotive, restaurant, and oil and gas sector resulting in severe employee layoffs. According to International Labour Organization (ILO) [19], in 2020, 8.8 percent of global working hours were lost relative to the fourth quarter of 2019, equivalent to 255 million full-time jobs which are also equivalent to approximately four times greater than during the global financial crisis in 2009. At present during second wave, in India it is estimated by Standards & Poor’s that about $210 million daily output loss in April-June quarter period [20].

World Bank report estimates 4.3 percent contraction in global economy in 2021 [21] because of COVID19 pandemic, and it estimates that 3.6 % contraction in U.S. GDP, 7.4% GDP contraction in European Union, 5.3 % GDP contraction in Japan and 2.6% contraction in aggregate GDP of emerging and developing economies. India, the world’s sixth-largest economy also had been hit hard by the pandemic last year as its GDP contracted by 7.9% [22]. Country braced the first wave of pandemic outbreak and made some impressive recovery but onset of more severe second wave in April 2021 has wiped out the previous economic gains and dented the economic recovery. Government of India has given more freedom to State Governments to take appropriate decisions based on local situations like imposing lockdown, etc. unlike the centralised decision which happened last year. This has allowed agriculture and heavy industry manufacturing sector to keep operating. Nevertheless, 100 million jobs were lost during the nationwide April-May 2020 lockdown, and at the present, during the month of May 2021, 15.3 million jobs were lost. This has resulted in an 18% jobless rate in urban areas of India, which is an additional burden on unemployed educated youth and which is now having an inverse relationship with their education backgrounds Table-1 [23].

A recent report STATE OF WORKING INDIA 2021: One year of Covid-19 (Azim Premji University) highlights that an average household of four members, used to have Rs. I5,989 monthly per capita income in Jan 2020 which has come down to Rs. 14,979 in Oct 2020. Unemployment is more pronounced in young workers (15-24 years age group) who failed to recover employment. Azim Premji report further observes rapid increase in informal employment sector during the pandemic as salaried workers shifted towards self-employment and daily wage activities. Further, it is reported that Covid-19 has made huge damage on women employment opportunities and 46.6% of jobs of women were not recovered Table-2. It is a foregone conclusion that increasing health expenses and reduced employment opportunities have further worsened the economic situation of poorer households, increased poverty level and contributed to wealth disparities [24].

On the other hand, Motilal Oswal Financial Services Ltd., found that India’s household savings dropped to 22.1% of GDP from 28.1% during April-June 2020 which is an alarming issue. The depleting household savings and falling incomes will have an adverse effect on household member’s health care expenditure, school expenditure and standard of living including domestic consumption, which accounts for about 60% of GDP.

Way forward:

Government relief measures like free rations, cash transfers, MGNREGA, PM-KISAN payments, pension payments Pradhan Mantri Garib Kalyan Yojana (PMGKY) and the Atmanirbhar Bharat packages have provided the soothing effect to most vulnerable population from pandemic in 2020. Government’s policy response to Covid-19 pandemic crisis is still to be reached at the needy people, particularly MSME sector. Nevertheless, the economic mayhem caused by the pandemic requires not only increasing the size and scope of the present economic relief scheme but also introducing new economic relief and reconstruction measures by considering substantial increase in the fund allocation to MGNREGA to support rural employment and to reduce the employment stress on rural areas. Potential employment opportunities can be created to the masses through MSMEs; thus, it is required to give stimulus package for employment linked incentives (ELI) to strengthen MSME sector as well as to boost employment. Credit Line Guarantee Scheme may be positively considered to extend to pandemic hit economic sectors to revive and survive the economy. With the help of technology, rural areas must be equipped for a more dispersed and decentralised growth model with substantial employment contribution. Finally, it is important to remember that the entire population of our country, irrespective of age criteria must be vaccinated to protect the lives against Covid-19 and its variants and also to recover the economy at fast and sustainable pace.

Figure 1: Covid-19 Outbreak in major Countries

Figure 2

Figure 3


Figure 4


Table-1: Unemployment in India among educated youth between age group of 15-30
Education 2011-12 2017-18 2018-19 2018-19 (>30 yrs)
Illiterate 1.7 7.1 6.05 0.57
Upto Primary 3 8.3 7.05 0.77
Middle 4.5 13.7 11.6 1.08
Secondary 5.9 14.4 13.6 1.46
Higher secondary 10.8 23.8 19.6 2.04
Graduate 19.2 35.8 33.7 3.06
PG and above 21.3 35.8 32.7 4
Total 6.1 17.8 16.1 1.24


Source: NSS 2011-12, PLFS 2017-18 and PLFS 2018-19.


Table-2: Women more likely to lose employment and not return to work
Trajectory Men Women
No recovery 7.0 46.6
Delayed job loss 4.3 10.7
Recovery 28.2 23.9
No effect 60.6 18.7
Total 100.0 100.0


Source: CMIE-CPHS. Data is for the December 2019-April 2020-December 2020 panel

Authors Brief Bio: Dr. S. Lingamurthy is Assistant Professor at Central University of Karnataka and Ms. Anandi Gunda is a volunteer intern student, Hyderabad





[4] GayathriVaidyanathan, Nature 593, 321-322 (2021)



[7] Andrews, MA; et al, Indian Journal of Medical Research. 151 (5): 490

[8] Shivani Kumar, Hindustan Times, 11 June 2020

[9] Shivani Kumar, The Week, 20 May 2020

[10] The Economic Times. 18 October 2020

[11] Journal of Industrial and Business Economics. 47 (3): 519–530

[12] Ministry of Home Affairs Unlock 5.0 official guidelines on their official website

[13] The Indian Express. 9 May 2021

[14] 12 August 2020

[15] Ministry of External Affairs – Government of India. 20 May 2021


[17] M, Kaunain Sheriff, The Indian Express, 5 May 2021


[19] ILO Monitor: Covid19 and the World of work, seventh edition, updated estimates and analysis, 25th January 2021,, accessed on 22nd June 2021

[20], accessed on 22nd June 2021

[21], accessed on 21st June 2021

[22] Ecowrap, SBI Research, Issue No. 13, FY22, 25th May 2021

[23] National Sample Survey 2011-12, PLFS 2017-18 and PLFS 2018-19.

[24] Centre for Sustainable Employment, ‘State of Working in India – 2021, one year of COVID19’, Azim Premji University, Bengaluru, Karnataka,, accessed on 22nd June 2021


Leave a comment

Your email address will not be published. Required fields are marked *