Post Mortem

COVID-19 and its impact on Nagaland economy

By Nagaland Post | Publish Date: 4/17/2020 11:47:22 AM IST

 The Covid-19 pandemic is the defining global health crisis of the present generation and the greatest challenge since WW II. The new sickness, COVID-19, has become one of the most tormenting problem globally that has literally pause the normal functioning of daily life. Certainly, it could be a serious thing in many aspects, but has few positive weights like the reduction of carbon emission and to focus more on research and development in medical science, better health care facilities and its infrastructure in the future. On an economist perspective, it is indeed not very healthy situation for the global economy in general, and particularly among the G7 countries (U.S, Canada, U.K, France, Germany, Italy and Japan). It has been observed that the global economic fallout could led to economic recessions in the U.S, European countries, Japan and the slowest growth will experience in China, Brazil, South Korea, Canada, India and a total of $ 2.7 trillion loss of output-equivalent to the entire GDP of the United Kingdom in days to come. On the other hand Indian economy would be severely hit by the Covid-19 and could even enter into a contraction of economic activities, depending upon the severity of the pandemic. The contraction could be (minus) -0.2 per cent for the fiscal year 2020-21 and the economy will be hit badly because of possible job losses and fall in income levels. Due to the complete lockdown and mobility restrictions, this demand for service may collapse, and aggregate consumption during the interruption phase may get completely lost. 

   However, the lockdown in India and especially Nagaland in the wake of Covid-19 has put the state economy into a stage of uncertainty. In Nagaland were 71.14 per cent of its population lives in rural sector and account 6.1 per cent of rural population lives below poverty line as per Rangarajan committee report 2011-12 depends on rural economy for their livelihood. In recent lockdown, larger population especially in rural areas, is in a state of obvious instability over issues including agriculture and allied activities, rural credit and also marketing of agriculture products to urban areas were almost all the households in rural areas directly depend for their subsistence. While the total shut down of economic activities in urban sector has a catastrophic effect on rural areas resulting in larger fall in employment and income in days to come. This will adversely affect investment flow, production of goods and services, domestic consumption, demand, export, pulling down constant GSDP (Gross State Domestic Product) growth rate of the economy from 5.8 per cent during 2016-17 to below.

In Nagaland, agriculture and allied sector contributes 27.47 per cent to GSDP and total export of the state stand at US$ 2.78 million during 2018-19 and US$ 2.40 million in FY20 (till September 2019) but would likely to fall by the end of fiscal year. No doubt, small and marginal farmers, agricultural labourers as well as daily wage earners working in informal sector in rural areas are the most affected due to the total breakdown of supply chains of essential items and agriculture inputs. Again, if lockdown continuous for longer period then the production from agriculture sector will fall drastically and almost all the households in rural sector face a high risk of falling into poverty and will experience greater challenges in regaining their livelihoods during the recovery period.       

In urban sector were 44 per cent of the population accounted for regular wage earner or salaried while 43 per cent was self-employed and the remaining in casual labour as per 61th NSSO (National Sample Survey Organisation) Report. It was experience that almost all the self-employed, startup entrepreneur, small business and workers working both formal and informal sectors of the economy are hard hit by COVID-19 lockdown in the state. Yet, they often receive less government support than government employees during lockdown period. Is the disparity justified? In urban areas informal sector being badly affected has resulted in loss of urban employment and income at higher rate. What’s more, massive layoffs and lack of relief measures are pushing migrant workers to return to their villages. As per the NSSO report during 2016-17, tertiary and manufacturing sectors account almost 56.34 and 11.80 per cent to SGDP (State Gross Domestic Product) and if the lockdown continue, then the contribution from those sectors will fall and the economy will experience recession along with stagflation. 

At this point of time state government seems to be struggling to find an appropriate mechanism to tackle the economic crisis created by the COVID-19 pandemic. What is really the best option? And how do we ensure that, once the pandemic is over. However, policy suggest that effective and holistic approach of macroeconomic stability measures in the short run such as strengthening MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act) programme in rural sector for longer period, supplying of free ration to poor rural-urban households through the public distribution system, large scale direct cash transfer using the Jan Dhan account, provide soft loans to households that lose wage days, Rescheduling bank loan repayment cycles for Self Help Groups (SHGs) and individual agricultural debtors, direct financial assistance to self-employed workers, small business house and young startup entrepreneur.  

Dr. Chubakumzuk Jamir Yingli College, Longleng

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