IMPACT OF COVID-19 ON MANUFACTURING INDUSTRIES IN INDIA: Networks and trade dependence

ABSTRACT

The Covid pandemic has resulted in an economic shock. However, not all sectors are affected uniformly. We study two channels on the supply side through which the shock is amplified differentially across industries. First, we look at the dependence on global value chain (GVC), measured as share of imports in total inputs, which measures an industry’s integration with the GVC. A disruption in GVC will amplify the shock more for a higher value of the import share in inputs. Second, we construct a network of industries based on inputs used and calculated a dependency score for each industry. Higher the dependency score, greater is the chance for disruption. We find that both these factors are correlated with output share of the industries, implying amplification and a significant impact. Using IIP data for the months post the onset of pandemic, we find that disruption is higher in industries with higher import share and higher dependency score. Finally, we create a vulnerability index using these two variables. Industries with higher VI score are likely to face greater challenges in the recovery process. © 2022 selection and editorial matter, Rajib Bhattacharyya, Ananya Ghosh Dastidar and Soumyen Sikdar;individual chapters, the contributors.