Small businesses, daily wagers worst hit by Covid 2.0 | Economic Times

Small businesses, daily wage earners, and frontline workers are among the worst hit in the second wave of Covid-19 while high-end manufacturing and IT services have weathered the storm, said a Reserve Bank of India report that hinted at further policy support.The most vulnerable are blue-collar workers who have to risk exposure for a living besides doctors and healthcare workers, law-keepers and municipal personnel, the Reserve Bank of India said in a report on the state of the economy in its latest monthly bulletin.“They will warrant priority in policy interventions,” it said. “It is in this direction that the Reserve Bank, re-armed and re-loaded, has stepped out. This is the beginning. There is more work to be done.”The central bank took a slew of measures at the beginning of this month to ensure liquidity support to the vulnerable segments of the society through banks and its other intermediaries.The impact of the second wave has largely been seen in terms of a demand shock on account of loss of mobility and earnings, while aggregate supply is less impacted, the RBI report said.The central bank maintained that high-frequency indicators for April and May 2021 are scanty given data lags but said, “Anecdotal evidence points to feedback loops from the demand contraction seeping through into curtailments of output in the months ahead unless infections ebb.”Impacts on discretionary spending and employment, besides inventory accumulation, are also likely.The impact of the new infections appears to be U-shaped, said the report. Each shoulder of the U represents sectors that are weathering the storm — agriculture at one end and IT on the other. On the slopes of the U are organised and automated manufacturing on one side and on the other, services that can be delivered remotely and do not require producers and consumers to move. These activities continue to function under pandemic protocols. In the well of the U are the most vulnerable sections.A silver lining amid the dark cloud is the fall in the test positivity rate to 7.9% on May 12 from 26.6% in early April in the ‘maximum city’ of Mumbai, one of the worst-affected places. “The road ahead is fraught with danger, but India’s destiny lies not in the second wave, but in life beyond it,” RBI said in the report.