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Quick Assessment of the Impact of the Covid-19 Pandemic and Lockdown

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Quick Assessment of the Impact of the Covid-19 Pandemic and Lockdown QUICK ASSESSMENT OF THE IMPACT OF THE COVID - 19 PANDEMIC AND LOCKDOWN ON KERALA’S ECONOMY KERALA STATE PLANNING BOARD THIRUVANANTHAPURAM MAY 2020 T ABLE OF C ONTENTS Introduction ................................ ................................ ................................ ................................ ........................ 1 Section I State Income ................................ ................................ ................................ ................................ ...... 3 Shortfall in State Gross Value Added as a Result of Covid - 19 Pandemic ................................ ........ 3 Section II Sector - wise Assessments ................................ ................................ ................................ ................ 5 Estimates of Losses in Agriculture ................................ ................................ ................................ .......... 5 Estimates o f Losses i n Animal Husbandry ................................ ................................ .......................... 18 Estimates o f Losses i n Fisheries ................................ ................................ ................................ ............ 26 Impact of Covid - 19 on Industry and Trade ................................ ................................ ......................... 33 Estimates o f Losses i n t he Tourism Sector ................................ ................................ ......................... 58 Estimate of Losses in Transport ................................ ................................ ................................ ............ 63 Impact of Covid - 19 and Response Measures in the IT sector ................................ .......................... 69 Impact of Covid - 19 and Response Measures on Power Sector ................................ ........................ 75 Impact of Covid - 19 on Labour and Employment ................................ ................................ .............. 79 Impact of Covid - 19 on W omen’s Employment ................................ ................................ ................. 85 Impact of Covid - 19 on Remittances and NRKs ................................ ................................ ................. 91 Appendix Estimating Losses for Kerala Using an Input - Output Model ................................ ................ 95 I NTRODUCTION This “ Quick Assessment of the Impact of the Covid - 19 Pandemic and Lockdown on Kerala’s Economy” is a preliminary assessment of losses in the State economy as a result of the pandemic and consequent lockdown across the country. The general reference period of the Assessment is the lockdown period, that is, March 25, 2020 to May 3, 2020. However, th e reference period of individual sections of the report differ, and have been specified at the relevant places. The report is based on a rapid assessment undertaken in order to address the urgent requirement of understanding the extent of damage caused by the pandemic and the consequent lockdown. The report was prepared by the State Planning Board on the instructions from the Chief Minister. The Chief Minister instructed the Board to undertake a quick assessment of losses to the State economy, particularl y to the sectors most vulnerable to the impact of Covid - 19 crisis and the imposition of lockdown. The report has two sections. The first section of the report deals with the impact of the pandemic and lockdown on Gross Value Added in the State as a whole. The calculations in the report are based on data from the Directorate of Economics and Statistics and suggestions from the Chairperson of the State Statistical Commission. The calculation of direct and indirect losses to the economy based on an input - outp ut model is included in the Appendix of the report. The second section of the report deals with sector - wise losses. The sectors that we have taken up for detailed examination were suggested by the Chief Minister: agriculture, animal resources, dairying, and fisheries, industries and trade, tourism, transport, information technology, power, labour, including women’s employment, and remittances. These reports were prepared by the Members and Chiefs of Divisions of the State Planning Board on the basis of re ports from the Departments. The reports of sectors, as and when finalised, were submitted to the Chief Minister. The economic crisis associated with the Covid - 19 pandemic is unprecedented. Previous disasters were mainly natural disasters, when the economy suffered damage to its productive capacity over a specific time, with measurable consequences in the short and medium term. The production of goods and services during the Covid - 19 pandemic came to an abrupt and almost total halt. Further, the halt to pro duction during the Covid - 19 pandemic is not locality - specific or scale - specific. Its effects are from top to bottom and across all locations. There is uncertainty about the period that it will take to resume production after the crisis is over. There is al so uncertainty about how long it will take to achieve previous levels of production. This is because the resumption of production involves national and international supply and distribution chains. 1 Although the economy is in flux, it is imperative to des cribe and quantify the impact of the present lockdown on different sectors of the State. Even in normal circumstances quantitative information on the performance of various sectors come with substantial time lag. The effort in this report is to provide som e order of magnitude rather than precise figures. Our estimates are based on information available today. However, the situation is dynamic and may change depending on the duration of the pandemic and the measures that governments may adopt to manage it, n ot just in the State but in the country and across the globe. We now propose to begin a second round of damage assessment. For this purpose, we conducted, on May 2, 2020, a National Consultation on Methodologies for Measuring State - Level Economic Losses in the Context of the Covid - 19 Pandemic. This was attended by experts from a range of institutions across the country and State , departments of the Government, the Kerala State Statistical Commission, and from the Kerala State Disaster Management Agency. Based on these and other discussions, we shall develop new methods of studying the economic impact of the pandemic on the econom y of Kerala. 2 S ECTION I S TATE I NCOME S HORTFALL IN S TATE G ROSS V ALUE A DDED AS A R ESULT OF C OVID - 19 P ANDEMIC S OME P RELIMINARY E STIMATES Effects on State Income This section deals only with estimates of shortfalls to gross value added to Kerala’s economy from March 2020 and in the first quarter of 2020 - 21. For 2018 - 19, the quick estimates of Gross Value Added in the State’s economy put it at 7 lakh crore at current prices. This was expected to grow at around 10 per cent in 2019 - 20 to 7.73 lakh crore . During a month of total lockdown with negligible production of goods and services except in a few selected sectors like government, banking, communication, etc, we might lose 80 per cent of the monthly value addition. For the month of March 2020 , assuming about 10 days of total production loss and decreased economic activity from middle of March, we estimate the shortfall in value addition in the State to have been roughly Rs 29,000 crore . For the first quarter of 2020 - 21, the entire month of Ap ril is affected with near total disruption in economic activity. It is expected that many of these would continue in May and in subsequent months. This will mean a loss of roughly Rs 80,000 crore in Quarter 1, assuming the normal production level in 2020 - 2 1 to be about 5 per cent higher than in 2019 - 20. Roughly we estimate the Quarter 1 losses in gross value addition to the Kerala Economy to be around Rs 80,000 crore . 3 Table 1 Estimate of shortfall in GSVA in Q1 of 2020 - 21 under different scenarios , Rs in crore Scenario Q1 of 2020 - 21 (Rs crore ) April May June Total for Q1 Shortfall in Gross Value Added : 60 , 000 11 , 400 7 , 600 79 , 000 April: 80 per cent May: 15 per cent June: 10 per cent Shortfall in Gross Value Added : 60 , 000 15 , 200 11 , 400 86 , 600 April: 80 per cent May: 20 per cent June: 15 per cent Note : Assumption: The economy in 2020 - 21 is taken to grow around 5 per cent given the overall economic downturn during the last two years and the Quarter 1 production is assumed to be about 28 per cent of the total annual production. That public administration part of GSDP remains same or rather improves, crop production, communication, finance, etc., suffering only small negative effects. Based on the employment structure and the sectoral distribution of income in Kerala, a complete lockdown is assumed to bring in about 80 per cent loss in value addition. 4 S ECTION II S ECTOR - WISE A SSESSMENTS E STIMATES OF L OSSES IN A GRICULTURE R EFERENCE P ERIOD : M ARCH AND A PRIL 2020 The total losses in the crop husbandry sector in agriculture, including plantation crops, are estimated at Rs 1570.75 crore. Losses for agricultural labourers due to loss of wages is estimated at about Rs 200.30 crore The Covid - 19 pandemic has affected Kerala’s agricultural sector in multiple ways. First, Kerala’s agriculture has a dominant presence of cash crops whose prospects are influenced by the nature of international trade. As the world economy has shut down, global trade has come to almost a halt. The World Trade Organisatio n (WTO) expects
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