Impact of Covid-19 on The Indian Economy

Introduction

COVID-19 which is termed as Corona Virus Disease was first identified in Wuhan-one of the major transportation hub in China in December-2019. From there, it has been spread worldwide and has been declared as pandemic by World Health Organization (WHO) in March-2019. The effects of this deadly virus are so much worst and has been felt and noticed in world’s most developed countries such as USA, Europe and many others. Pattern of economic activity is one of the most crucial and concern factor amongst the most striking consequences of this pandemic disease. WHO which is working with global experts in different countries, governments, and other health organizations has provided advice to the countries to take all the precautionary and preventive measures for safety. The effect of this pandemic disease is even worse in India. India suffered through the financial crisis in 2008-09 and now in 2020 the impact of COVID-19 seemed much worse. The country will seem to face multiple challenges in various sectors such as health, economy, finances etc.

Today, in India, we are focusing on securing the population from drastic results of this disease in terms of health hazards and providing relief to poor but we also need to concentrate about securing the economy of India. In this article, we are putting together some facts as an attempt that what has changed and affected on Indian economy.

Indian economy is a developing market economy. It’s economy is the world's 5th largest economy by nominal Gross Domestic product (GDP) of the country and the 3rd largest by Purchasing Power Parity (PPP). In 2018, According to the International Monetary Fund (IMF, India is ranked 139th by nominal GDP  . From 2014-2018, India was the world's fastest-growing major economy. However, The economy got slower in 2017 due to Goods and Service Tax (GST) and demonetization in 2016. In 2018, India became the world's 10th largest importer and the 19th largest exporter. India has been a member of the World Trade Organization since 1 January 1995. India in on ranks 63 on Ease of doing business index and 68th on the Global Competitiveness Report. The Indian labour force is the world's 2nd largest as of 2019. GDP of India at its purchasing power parity have the capacity that could even overtake United States by 2050.

However, from the past few quarters, the economy of India has been experiencing slowdown. The economy grew at a 6year low rate at 4.7% in the current financial year 2020. Investment and consumption demand had been declining, and several prompting and encouraging measures have taken to bring the economy on a path of growth again. There was some plausible hope for recovery in the last quarter of the financial year. But, the Coronavirus epidemic has made recovery process difficult at this time. The outbreak of corona has created new challenges and difficulties for India's economy, creating severe disruptive effects on demand and supply elements, which have the potential worst effects to derail India's growth story. Due to the sudden lockdown has declined the economic activities and is unexpected in the history of India .The impact of the economy for the year 2019–20 coronavirus in India has been mostly disruptive. The credit rating agencies  have downgraded India's growth in the year 2021.Covid-19 will change the thinking of the world that how it thinks and work, There is one question on everyone mouth that ‘Will things go back to normal?, this is the repetition of economic breakdown and financial crisis that was happened in 2008 and how we recovered from that pandemic crisis as we are facing now in 2020 due to COVID-19.

According to the survey conducted by various agencies, COVID-19 is having a 'deep impact' on the Indian economy. Jobs are at high risk in coming months because industries are looking for some reduction in the workforce. As per the survey conducted by FICCI, It has added that already COVID-19 crisis has created unprecedented destruction in economic activities over the last few months.

The impacts of COVID-19 on significant sectors of the Indian economy are the following.

The entire chain of demand and production cycle is disturbed due to huge uncertainty and fall in market. The sectors such as Tourism and Travels, Aviation are one among the many affected sectors those are facing the maximum crisis. Cinema halls are shut and very less number of consumers are visiting in shopping markets which has impacted the retail sector. This has declined the consumption of both essential and optional items. The purchasing decisions of customers are changed due to the fear and panic which is spread among people. It has reduced the overall confidence to purchase and thus reduced the demand. Restrictions put on travel have impacted transport sectors severely. As the people are cancelling and postponing the personal trips and business trips/conferences, so it has witnessed a significant shock on hotels economy as well. The travel and transport industry has accounted a loss of around $4.5 billion on every single day of lockdown.

Manufacturing is an important part of economy. Lockdown has deeply affected the supply chain of essential and non-essential commodities. From the supply side, the factories are shut and it has resulted delay in the supply of goods/items from China. It has affected manufacturing sectors of India. It is also hampering business sentiment and affecting production schedules of companies. It has hunted the imports of critical raw materials, and in this way other countries like Asia, Europe and USA where the manufacturing is slow due to lockdown has also put impact on India’s exports also.

Corona virus crisis is hitting the nation’s farmers and food supplies. April is month of celebration and hard work because this is the time when farmers sell their wheat in market but due to covid attack and lockdown has led the conditions of farmers in miserable state. Although the virus cases are majorly in big cities but it has triggered the collapse in demand of food items from villages. The agriculture accounts for only 15% of the GDP but the lockdown has dropped down all the demand and it is a real tragedy for Indian farmers.

Covid-19 crisis has created the financial market extremely volatile due to high risk of uncertainty of future that is leading to major crashes in financial market. The BSE sensex and NSE Nifty crashed by more than 8% in a single day in March, BSE Sensex dropped by 2,919 points – its highest 1day fall ever while the NSE Nifty fall by 868 points An estimate of Rs. 10 lakh crore of market cap was reported that was wiped off due to this single-day fall.

China is a significant market for many Indian products like seafood, petrochemicals, gems, and jewelry. The outbreak of coronavirus has severely impacted exports to China. For example, the fisheries sector is anticipating a loss of Rs 1,300 crore due to exports fall. India exports to 36% of its diamonds to China, also affected. The cancellation of 4 major trade events between February and April cause an estimated loss of 8,000-10,000 crore business opportunity for Jaipur, Rajasthan. India also exports 34% of its petrochemical items to China. Because of export restrictions to China, petrochemical products are expected to see a price reduction. According to UNCTAD estimates, exports across global value chains could decrease by US$ 50 billion during the year if there is a 2% reduction in China's exports of intermediate inputs.

The travel industry is one of the sector to by affected by corona outbreak. According to Indian Association of Tour Operators (IATO), losses of upto 85,00 crores are expected due to lockdown imposed on travel and tour industry. The situation is already distressed in aviation industry and cancellation of tickets, refunds of tickets and low utilization of airlines and railways and other transports has made the situations even worse.

Conclusion

COVID-19 is the most severe pandemic not only in the terms of most serious global health crisis but also has become the most expensive economic pandemic in the recent history. This may be the time to reset. It was never ever before in the history when the world has come to a halt/standstill where we can just pick apart the many moving pieces. If we do things right at right time we may be able to fix challenges that humankind across the world is facing – environmental damage, economic damage and more. In this article, we have presented the impact of COVID-19 on global economy as well as on Indian economy. Different sectors which are affected from this pandemic are briefly mentioned.

References

1. https://en.wikipedia.org/wiki/Economy_of_India
2. https://www.researchgate.net/publication/341266520_Effect_of_COVID-19_on_the_Indian_Economy_and_Supply_Chain
3. https://etinsights.et-edge.com/wp-content/uploads/2020/04/KPMG-REPORT-compressed.pdf