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The first national lockdown in India, initiated on March 25, 2020, to combat the novel Covid-19 pandemic, left an indelible mark on the nation's socio-economic landscape. Five years on, the echoes of that period, characterized by clear skies, deserted streets, and the haunting wail of ambulance sirens, continue to resonate across various sectors. While the immediate experience of confinement may fade into memory, its transformative impact on India's economic structure, investment patterns, and labor dynamics remains palpable. This essay will delve into the multifaceted changes wrought by the lockdown, examining the post-Covid startup boom, the shifting economic fortunes of states, the evolving preferences of foreign investors, the struggles of the tourism industry, and the persisting challenges in the labor market. The initial response to the pandemic, though disruptive, catalyzed significant changes, accelerating existing trends and creating new opportunities in unexpected corners of the Indian economy. The digital adoption rate skyrocketed, paving the way for the proliferation of startups and innovative business models. State governments, forced to confront unprecedented challenges, adopted new strategies for economic growth, leading to notable shifts in regional development. Foreign investors, reassessing risk and opportunity, redirected capital flows, altering the landscape of foreign direct investment. The tourism sector, dealt a devastating blow, faced a long and arduous road to recovery. The labor market, fragmented and vulnerable, experienced a mass exodus of workers, the consequences of which continue to be felt today. Understanding these transformations is crucial for formulating effective policies and strategies to navigate the post-pandemic world and build a more resilient and equitable economy. The lockdown, while a period of immense hardship, served as a catalyst for innovation, adaptation, and ultimately, a reshaping of the Indian economic landscape. The entrepreneurial spirit was ignited, state governments demonstrated newfound agility, and investors recognized the potential for growth in new sectors and regions. However, the challenges of uneven recovery and labor market vulnerabilities persist, requiring concerted efforts to ensure that the benefits of growth are shared more widely and that the most vulnerable segments of society are not left behind. The legacy of the lockdown is a complex and multifaceted one, a blend of hardship and opportunity, disruption and innovation, challenge and resilience. As India moves forward, it must learn from the experiences of the past five years and build a future that is more inclusive, sustainable, and prepared for the challenges of an uncertain world.
The surge in startup registrations following the lockdown is a testament to the resilience and adaptability of the Indian entrepreneurial ecosystem. The uncertainty surrounding future lockdowns and the broader economic outlook created a sense of urgency, driving individuals to explore new ventures and embrace innovative business models. This, coupled with supportive government policies aimed at promoting entrepreneurship, fueled a dramatic increase in the number of startups registered with the Department for Promotion of Industry and Internal Trade (DPIIT). The data speaks for itself: from a modest 14,534 startups registered at the end of 2020, the number exploded to 1.58 lakh by the end of 2024. This tenfold increase reflects a fundamental shift in the Indian business landscape, with entrepreneurship becoming an increasingly attractive and viable career path. The most remarkable growth was observed in states that had previously lagged in startup activity, such as Mizoram, Arunachal Pradesh, Ladakh, Nagaland, and Jammu & Kashmir. These regions, often characterized by unique challenges and untapped potential, witnessed exponential growth in startup registrations, indicating a burgeoning entrepreneurial spirit and a growing awareness of the opportunities available. This geographic diversification of startup activity is a positive sign, suggesting that the benefits of entrepreneurship are spreading beyond the traditional hubs and reaching underserved communities. The lockdown, in a way, democratized access to entrepreneurship, providing individuals from diverse backgrounds and regions with the opportunity to pursue their dreams and build businesses. The rise of remote work and digital technologies further facilitated this trend, enabling entrepreneurs to operate from anywhere in the country and access a wider range of resources and markets. The success of these startups will depend on their ability to adapt to changing market conditions, innovate continuously, and attract investment. However, the sheer volume of new ventures suggests that India is on the cusp of a new era of entrepreneurial dynamism, with the potential to create jobs, drive economic growth, and solve pressing social challenges.
The lockdown's impact on state economies was uneven, with some states rebounding more strongly than others. While all states experienced economic disruption during the lockdown, a few managed to not only recover but also accelerate their growth in the subsequent years. Assam, Odisha, Chhattisgarh, and Sikkim emerged as frontrunners, demonstrating remarkable resilience and adaptability. According to data from Niti Aayog, Assam's Gross State Domestic Product (GSDP) rose by an impressive 32 percent between FY20 and FY24, followed by Odisha at 31 percent, and Chhattisgarh and Sikkim at 28 percent each. These figures highlight the diverse economic trajectories of different states and the importance of state-level policies in shaping economic outcomes. The factors contributing to the success of these states are varied and complex, ranging from effective governance and infrastructure development to strategic investments in key sectors and a favorable business environment. Assam, for example, has benefited from its strong agricultural sector and its growing tourism industry. Odisha has capitalized on its rich mineral resources and its focus on industrial development. Chhattisgarh has leveraged its natural resources and its efforts to improve infrastructure and connectivity. Sikkim has benefited from its unique tourism offerings and its focus on sustainable development. These success stories demonstrate the potential for states to drive economic growth by leveraging their unique strengths and pursuing tailored development strategies. However, it is important to note that these gains must be inclusive and sustainable, ensuring that the benefits of growth are shared by all segments of society and that the environment is protected. The challenge for these states is to maintain their growth momentum while addressing issues such as poverty, inequality, and environmental degradation. By focusing on inclusive growth and sustainable development, these states can serve as models for other regions of India and contribute to the overall prosperity of the nation.
The pandemic and the subsequent recovery significantly altered the preferences of foreign investors. Gujarat, which accounted for the largest share of foreign direct investment (FDI) in India between October 2019 and December 2020 (32 percent), saw its share nearly halve to 16.4 percent between October 2019 and December 2024. This shift reflects a reassessment of risk and opportunity by foreign investors, who are increasingly looking beyond traditional investment destinations and exploring new growth markets. Maharashtra emerged as the top recipient of FDI inflow between October 2019 and December 2024, accounting for 31.4 percent of the total, according to the DPIIT. Karnataka's share also increased significantly, rising from 14.1 percent to 20.3 percent during the same period. These changes highlight the growing attractiveness of states with strong infrastructure, skilled labor, and a favorable business environment. Maharashtra, with its established industrial base and its financial hub in Mumbai, continues to be a magnet for foreign investment. Karnataka, with its booming IT sector and its vibrant startup ecosystem, is attracting a growing share of FDI. The shift in FDI preferences reflects a broader trend of economic diversification and regional development in India. Foreign investors are increasingly recognizing the potential for growth in states beyond the traditional hubs, driven by factors such as lower labor costs, access to natural resources, and supportive government policies. However, attracting and retaining foreign investment requires a sustained commitment to improving infrastructure, streamlining regulations, and fostering a stable and predictable business environment. States must compete effectively to attract FDI, by showcasing their unique strengths and creating a welcoming environment for foreign businesses. By attracting FDI, states can boost economic growth, create jobs, and improve the quality of life for their citizens.
The tourism sector, one of the hardest hit by the lockdown, continues to grapple with the lingering effects of the pandemic. With travel restrictions and border closures bringing international tourism to a standstill, the sector experienced a dramatic decline in revenue and employment. While domestic tourism has rebounded to some extent, the recovery of international tourism has been slower and more uneven. About 80 percent of foreign tourists arrive in India through eight major entry points: the Kolkata, Bengaluru, Delhi, Mumbai, Chennai, and Cochin airports, and the Haridaspur land border. Arrivals at these points were still 8.2 percent lower in 2023 compared to 2019 levels, indicating that the sector is still far from a full recovery. The Kolkata airport saw the sharpest decline (43 percent) in foreign tourist arrivals, followed by a 13 percent dip in the Bengaluru airport and the Haridaspur land border. The reasons for the slower recovery of international tourism are multifaceted, including lingering concerns about health and safety, travel restrictions, and the impact of the pandemic on global economies. The decline in arrivals at the Kolkata airport may be attributed to factors such as connectivity issues, perceptions of safety and security, and the impact of the pandemic on the city's tourism infrastructure. The tourism sector is a vital contributor to the Indian economy, generating employment, revenue, and foreign exchange earnings. A full recovery of the sector is essential for supporting livelihoods and driving economic growth. To promote tourism, the government is implementing various initiatives, including visa relaxations, marketing campaigns, and infrastructure development projects. However, the sector also needs to adapt to changing consumer preferences and embrace sustainable tourism practices. By focusing on responsible tourism and providing high-quality experiences, India can attract more international tourists and ensure the long-term sustainability of the sector.
The reverse migration of the labor force and the subsequent contraction of the labor market were among the most visible and impactful consequences of the lockdown. With businesses shuttered and livelihoods threatened, millions of migrant workers were forced to return to their home states, leading to widespread economic hardship and social disruption. While the labor force participation rate increased by 2.6 percentage points between October-December 2019 and October-December 2024, Delhi experienced a sharp decline of 7.1 percentage points. This divergence highlights the uneven impact of the lockdown on different regions and the challenges of labor market recovery. In contrast, Assam, Rajasthan, and Chhattisgarh saw significant increases in their labor force, with expansions of 7.6 percent, 6.9 percent, and 4.8 percent, respectively. These increases may be attributed to factors such as the return of migrant workers to their home states, the growth of local industries, and the implementation of employment generation programs. The labor market remains a key area of concern, with high levels of unemployment and underemployment, particularly among young people and those with limited skills. Addressing these challenges requires a multi-pronged approach, including investing in education and training, promoting entrepreneurship, and creating a more flexible and inclusive labor market. The government is implementing various schemes to promote employment and skill development, but more needs to be done to address the structural issues that contribute to labor market vulnerabilities. By investing in human capital and creating a supportive environment for job creation, India can unlock its economic potential and ensure that all citizens have the opportunity to participate in the workforce and contribute to the nation's prosperity. The recovery of the labor market is essential for achieving inclusive growth and reducing inequality. By addressing the challenges of unemployment and underemployment, India can build a more resilient and equitable economy.
In conclusion, the first national lockdown in India triggered a series of profound changes across various sectors, reshaping the nation's economic landscape in significant ways. While the immediate impact was devastating, the lockdown also served as a catalyst for innovation, adaptation, and resilience. The startup boom, the shifting economic fortunes of states, the evolving preferences of foreign investors, the struggles of the tourism industry, and the persisting challenges in the labor market all bear witness to the transformative power of this unprecedented event. As India moves forward, it must learn from the experiences of the past five years and build a future that is more inclusive, sustainable, and prepared for the challenges of an uncertain world. By embracing innovation, promoting regional development, attracting foreign investment, supporting the tourism sector, and addressing the challenges in the labor market, India can unlock its economic potential and ensure that all citizens benefit from the nation's prosperity. The legacy of the lockdown is a complex and multifaceted one, a blend of hardship and opportunity, disruption and innovation, challenge and resilience. As India navigates the post-pandemic world, it must draw on its strengths and address its weaknesses to build a brighter and more equitable future for all.
Source: 5 years later: What the first national lockdown changed within India