Demonetisation, GST rollout, Covid led to loss of `11.3 lakh cr for Indian economy, reveals report

Bengaluru/New Delhi, NT Bureau: Between 2016 and 2023, India's economy suffered a significant blow, with macroeconomic shocks resulting in a staggering Rs 11.3 lakh crore loss.

Furthermore, the informal sector was severely impacted, with a massive 1.6 crore jobs lost during this eight-year period, as reported by India Ratings and Research.

Three primary shocks affected the economy in these eight years: the demonetisation of high-denomination currency notes in 2016, the implementation of the Goods and Services Tax in 2017, and the economic downturn caused by the Covid-19 pandemic in 2020, reported The Hindu.

These economic losses amounted to 4.3% of India’s gross domestic product in the year 2022-23, the agency stated. The informal sector was "severely impacted" by these shocks, with an estimated 63 lakh informal enterprises shutting down between 2015-16 and 2022-23, leading to the loss of approximately 1.6 crore jobs, according to the ratings agency.

“This period also coincided with the rise in the formalisation of the economy, which has led to robust tax collections,” said Sunil Kumar Sinha, principal economist at the agency, as quoted by the newspaper.

“While formalisation of the economy is the way forward, the reduced unorganised sector footprint has implications for employment generation,” Sinha added.

The India Ratings and Research report was based on the Annual Survey of Unincorporated Sector Enterprises released by the Ministry of Statistics and Programme Implementation on July 5.

The ministry’s survey noted that the enterprises in the nonagricultural sector increased from 5.97 crore in 2021-22 to 6.5 crore in 2022-23. During the same period, employment rose from 9.79 crore workers to 10.96 crore workers.

However, in 2015-16, before the first economic shock of demonetisation, around 11.13 crore workers were employed in the sector, The Hindu reported. In the absence of macroeconomic shocks that began in 2016, the total number of nonagricultural enterprises in India would have been 7.14 crore in 2022- 23, based on the growth pattern observed between 2010-11 and 2015-16.