Economic Impact of School Shutdown during Covid-19

• 28 May 2022

For Prelims: Gross Domestic Product, Asian Development Bank.

For Mains: Impact of Covid-19 on Indian Education System and Economy.

Why in News?

According to an Asian Development Bank (ADB) paper, the Gross Domestic Product (GDP) of India is likely to see the highest decline in South Asia due to Covid-19 related school-shutdown.

• School closures led to the contraction in global GDP and employment. This scenario is expected to aggravate further with time.
• India is among those countries that had the longest school closures during the Covid-19 pandemic.

What will be the key impact on Economy?

• Global Scenario:
  • Impact on GDP:
    • GDP has been projected to decline to 0.19% in 2024, 0.64% in 2028, and 1.11% in 2030 with a total estimate of $943 billion.
  • Impact on Skilled Labour:
    • School closures will deny about 5.44 million people around the world employment in the skilled labor force by 2030.
    • Employment is likely to decline to 0.05% in 2024, 0.25% in 2026, and 0.75% in 2030 with a total loss of wages amounting to $94.86 billion.
  • Impact on Unskilled Labour:
    • Employment is estimated to decline to 0.22% in 2025, 0.51% in 2027, and 1.15% in 2030.
    • Nearly 35.69 million people would migrate towards the unskilled labour-force amounting to $121.54 billion lost wages in 2030.
• Different Impact on Different Economies:
  • Across Asia, worst-hit economies include those with significant student populations from rural areas and those in the poorest and second wealth quintile. This is due to internet connectivity issues, therefore, inaccessibility to online education.
  • As many impacted students shifted to unskilled labour-force, the economies with high share of unskilled labour employment experienced significant learning and earning losses.
• Indian Scenario:
  • Impact on GDP:
    • In percentage terms, its GDP will decrease by 0.34% in 2023, 1.36% in 2026, and 3.19% in 2030.
    • By 2030, India will account for 10% of the global GDP decline of $943 billion.
  • Impact on Labour:
    • At present, India’s workforce comprises 408.4 million unskilled and 72.65 million skilled labour force.
    • A significant migration towards unskilled work force is likely to happen with 1% and 2% decline in skilled and unskilled labour jobs, respectively.

What is Gross Domestic Product?

• GDP is a measure of economic activity in a country. It is the total value of a country’s annual output of goods and services. It gives the economic output from the consumers’ side.
• GDP = Private consumption + Gross investment + Government investment + Government spending + (exports-imports)

What is Asian Development Bank?

• ADB is a regional development bank established in 1966.
• It has 68 members. India is a founding member. 49 are from within Asia and the Pacific and 19 outside.
• It aims to promote social and economic development in Asia and the Pacific.
• As of 31^st December 2020, ADB’s five largest shareholders are Japan and the United States (each with 15.6% of total shares), the People’s Republic of China (6.4%), India (6.3%), and Australia (5.8%).
• It is headquartered in Manila, Philippines.

Way Forward

• The Indian Government is proactively working towards stabilizing the economy through efforts like monetary easing, fiscal stimulus, and supportive financial regulation. Recently, it has also launched e-Shram portal. However, there is a need for higher investments in the arena of education along with an emphasis on narrowing the digital divide to counter the effect of learning losses during the pandemic.
• Learning recovery can be supported by conducting assessments for pandemic-affected students.
• In the budget, government should prioritize spending on education. Adequate funding and resources must be directed to students from the rural, economically-weaker and socially disadvantaged groups that were worst affected by the pandemic.
• Additionally, youth skill training programmes must be started for the youth already passed out of the school.
• Educational reforms must be undertaken to promote face-to-face as well as remote learning.

Source: TH