Rs 11.3 lakh crore lost, 1.6 crore jobs gone due to note ban, GST, COVID
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The cumulative impact of the macroeconomic shocks caused by demonetisation, the GST implementation, and the COVID-19 pandemic resulted in significant economic losses and job cuts, leading to an estimated loss of Rs 11.3 lakh crore and the elimination of 1.6 crore informal sector jobs in the Indian economy between 2016 and 2023.
According to a report by India Ratings and Research, the period from 2016 to 2023 saw three primary disruptions: the demonetisation of high-denomination currency notes in 2016, the implementation of the Goods and Services Tax (GST) in 2017, and the economic downturn caused by the COVID-19 pandemic in 2020.
These shocks have had a cumulative impact equivalent to 4.3% of India's gross domestic product (GDP) in the financial year 2022-23. The informal sector, which employs a large portion of the workforce, was particularly hard hit. Between 2015-16 and 2022-23, around 63 lakh informal enterprises shut down, leading to a significant reduction in employment within the sector.
While these disruptions posed severe challenges, the period also saw increased formalisation of the economy. This shift contributed to robust tax collections, signalling a move towards a more organised economic structure. However, the reduced footprint of the unorganised sector has raised concerns about employment generation, as informal enterprises have traditionally been a significant source of jobs.
The findings from India Ratings and Research are based on the Annual Survey of Unincorporated Sector Enterprises released by the Ministry of Statistics and Programme Implementation on July 5.
The survey highlighted a growth in the number of non-agricultural enterprises from 5.97 crore in 2021-22 to 6.5 crore in 2022-23. Correspondingly, employment in this sector increased from 9.79 crore workers to 10.96 crore workers during the same period. However, this is still below the pre-demonetisation employment level of 11.13 crore workers in 2015-16.
The report suggests that in the absence of macroeconomic shocks starting in 2016, the total number of non-agricultural enterprises in India could have reached 7.14 crore by 2022-23.
Furthermore, employment in this sector might have risen to 12.53 crore workers, based on the growth pattern observed between 2010-11 and 2015-16. Despite some recovery, the Gross Value Added (GVA) to the economy by informal enterprises in 2022-23 was still 1.6% lower than in 2015-16.
The GVA is a measure of the economic value added by producers to their goods and services. The continued lower GVA indicates that informal enterprises have not fully rebounded from the economic shocks of the past eight years, highlighting the ongoing challenges faced by this vital sector of the Indian economy.