By Manahil Habib

The socioeconomic impacts of the pandemic have spread to almost every country in the world. While some economies managed to reach the road to recovery amidst the recent vaccine rollout, others are struggling to return to pre-pandemic economic welfare. With the discovery of new variants and a spike in cases caused by the second wave, the world still seems far from recovering from the ongoing health crisis. But the impact of the virus has been considerably disproportionate amongst regions, with South Asia being hit divergently from other developed countries.

South Asian countries such as India, Pakistan, Bangladesh, Nepal and Sri Lanka, have shown strong economic growth in recent decades. With investments in agriculture, manufacturing, tourism, and the export sector, economic growth reduced unemployment. It alleviated the magnitude of poverty as well as improved domestic infrastructure. These countries were also successful at controlling the virus in its initial stages compared to the rest of Asia; however, the severe outbreak of the second wave, especially in India, has halted rising growth rates. As of June 2021, South Asia is the region with the third-highest Covid-19 cases, ranked after South and North America and Europe.

How has the pandemic affected the GDP of South Asian countries?

The recent contraction of GDP in South Asian countries is primarily driven by the decline of industrial production and international trade due to nationwide lockdowns, followed by a fall in private consumption. Due to South Asia’s large informal sector, which depends on daily-wage jobs to put food on the table, lockdowns can result in widespread starvation and thus put many at risk of extreme poverty. Hence, governments of the region compromised complete lockdowns to retain labor mobility to avoid disruption to daily-wage workers despite experiencing surges in infections.

Bangladesh’s textile industry experienced a dramatic economic shock as international brands canceled retail orders amid the pandemic. According to Institute of Human Rights and Business, $3.2 billion worth of orders had been suspended or revoked. Bangladeshi workers lost nearly 30% of their wages, estimated at $502 million. In India, GDP decline is primarily caused by the collapse of the healthcare system and poor government policies to curb the virus. Flight restrictions and decline in international travel affected Sri Lanka’s travel and tourism sector, a vital driver for the island’s economy.

The agriculture sector was the least affected throughout all economies, with exceptions during the initial stages of the pandemic, which slowed down production due to disruptions in transport systems and lack of storage facilities.

Remittance inflow (transfer of funds from abroad) to South Asian countries also declined significantly. Closure of remittance transfer businesses and unemployment abroad contributed to the decline of GDP and affected the livelihood of families that rely on migrant workers for household income. Remittances play a vital role for South Asian economies as they are the primary source for foreign exchange.

Shifts in unemployment within the region

The World Bank estimates that more than 80% of workers in South Asia engage in informal work. The region’s major megacities such as Mumbai, Delhi, Karachi, and Dhaka are heavily populated with informal workers, mostly within formal organizations. The crisis has put many casual and temporary workers out of work, caused by mobility restrictions and a fall in demand.

As stated by The World Bank, almost 115 million people have been pushed into poverty since the outbreak. The number rises as the crisis progresses. Mobility restrictions also affected inward migration, which many informal workers depend on as they travel from rural areas to urban cities to find work. For Bangladesh, India, and Pakistan, the poorest third of the population relying on the informal economy lost 9, 13, and 16 percent of their incomes, respectively.

All types of employment were affected differently. White-collar jobs were less vulnerable to job losses as they adapted to the ‘work-from-home’ model, but retail suffered as many micro firms shut down due to fall in demand. The probability of being open for South Asian firms in accommodation services (18%) and food preparation (50%) was lower compared to information and communication technology and financial services (over 75%). Approximately 18 million people in Pakistan lost their jobs and in India, approximately 30–100 million in formal and informal sectors. For the apparel sector alone, layoffs of around 2.5–3m have been estimated in Bangladesh.

Financial Assistance to the vulnerable

Governments of the region announced several fiscal stimulus packages to support businesses, industries, and households, which consisted of direct cash transfers, food assistance, slashing interest rates, and providing health insurance to citizens.

However, the inadequate distribution system and lack of healthcare facilities failed to

reach every economically vulnerable citizen in each country efficiently. Due to the large informal sector, many workers are not registered anywhere and cannot receive social security or legal cover.

“While the stimulus package will assist almost 800 million people, these measures are not enough. Based on global trends, India will likely experience a spike in Covid-19 cases over the next few weeks. Moreover, social distancing will likely be

more difficult in India than in, say, the United States, due to the higher proportion of communal living arrangements and population density,” stated Saniyah Ahmad for Atlantic Council.

The World Bank listed Pakistan’s Ehsaas Emergency Cash Programme among the top global social protection measures, which provided emergency cash transfers of PKR12,000 ($75) each to families affected by the crisis. In January, the Bangladeshi government approved two Covid-19 stimulus packages of 27 billion takas to support small and medium enterprises and low-income communities, and India responded by unveiling a INR1.7 lakh crore ($22.6 billion) economic stimulus.

Road to Recovery

Recently, governments have increased spending to purchase vaccine doses in hopes of lowering infection rates and returning to pre-pandemic economic growth, especially after the second wave hit the region earlier this year. But given the inability for densely populated cities to adhere to social distancing measures, fully lifting restrictions increases the chances of a potential third wave. Governments need to continue their efforts to vaccinate citizens, especially in rural areas where people are still widely uninformed about vaccines and their role in curbing the virus. More so, funding should also be used to develop distribution systems to prevent further damage to low-income households.