COVID-19 Impact on India’s Manufacturing Sector
COVID-19 halted numerous commercial activity throughout the world, as some nations shut down their ports, airports, and domestic transit while enforcing nation-wide lockdowns, causing chaos in business and public life. The Indian shutdown disrupted manufacturing activity all around the world. India took exceptional precautions to halt the spread, establishing one of the world’s longest lockdowns to compensate for the scarcity of healthcare resources. The magnitude of the shutdown impacted both industrial and supply systems, affecting the whole economy.
While India recovered rather well from the first wave, the second wave has been the most devastating in terms of casualties. The second wave has resulted in more state-imposed lockdowns, affecting the economy and imposing various limitations on vital enterprises. As a result of the lower labour availability during this period, labor-intensive industries such as manufacturing, real estate, construction, and infrastructure experienced a slowdown.
The IHS Markit India Manufacturing Purchasing Managers’ Index (PMI) fell to a seven-month low of 55.4 in March 2021, dropping from 57.5 in February 2021. Data for April show a small increase to 55.5 after falling to a seven-month low of 55.4 in March. India’s GDP decreased by 23.9% in the first quarter (Q1) of 2020–21, and the manufacturing sector’s share of total gross value added (GVA) fell from 17.5% in Q1 of 2019–20 to 13.8% in this quarter. In the first quarter of 2020–21, the manufacturing sector’s growth rate fell to -39.3%. Manufacturing growth has slowed for the eighth quarter in a row, showing a lack of demand and a deeper structural crisis in the industry exacerbated by pandemic-induced lockdowns.
Imports of heavy machinery and equipment, on which our manufacturing and other industries rely, have been declining. As several industries that appear in India’s key exports are also among India’s top imports, the purchase of these capital goods is critical for keeping a threshold on production increase.
COVID-19 will be around for a little more, with a third wave expected in India. Meanwhile, non-essential retail shops are temporarily shuttered, and vendor and customer moods are dismal as they deal with uncertainty. There is an even greater degree of uncertainty in the industrial sector. It will need a major effort and significant financial incentives from the government, industry, and other essential players to ensure that manufacturing returns to operating mode.