Economic Impact on India due to Covid-19

Today each and every other country is suffering from the different problems created by the novel coronavirus. Nearly 3 million people are infected and over 200,000 people has lost their lives. It is creating many other problems for us as well. It seems that the whole world will move a year backwards from their progression. Many people lost their jobs and are now no where to go. People are in great anxiety and there seems to be no solution.

One of the biggest problems we are facing is the economic impact. Lets see what major economic impacts will we face due to this pandemic.

In India up to 53% of businesses have specified a certain amount of economic impact of shutdowns caused due to COVID-19 on operations (according to sources). Various business such as hotels and airlines are reducing the salaries and temporarily suspending their employees to cut down the expenses.By 24 April the rate of unemployment had increased nearly 18% within a month, reaching almost 24%unemployment across India, according to the Centre for Monitoring Indian Economy. Around 140 million Indian lost employment due to the lockdown. More than 42% households across the nation have reported an income drop as compared to the previous year.

Live events industry has seen an estimated loss of 3,000 crore (US$420 million). An adverse moment for a number of young startups as funding has fallen. A DataLabs report shows a 45% decrease in the total growth-stage funding. On 4 April, former Reserve Bank of India chief Raghuram Rajan said that the coronavirus pandemic in India may result in "the greatest economic emergency since Independence".This economic impact will be one of the massive one's in history.

Companies are try to reduce their expenses and at the same time are trying to reduce stress among their employees . Tata Group has set up a task force to make working from home more effective.

Night lights and economic activity are connected. In Delhi, night light radiance fell 37.2% compared to 1–31 March 2019. This was the biggest fall for any metro in India. Bangalore fell 32% while Mumbai dropped by 29%.

Agriculture Impacts

Due to logistical problems following the lockdown tea estates' first harvest was prevented. The entire Darjeeling tea based tea industry will see unusual fall in revenue. Tea exports could drop up to 6% as a result.

From 20 April, under the new lockdown guidelines to reopen the economy and relax the lockdown, trying to loosen the economic impact. Agricultural businesses such as dairy, tea, coffee and rubber plantations, as well as associated shops and industries, will reopen.

Manufacture Industry

Major companies in India such as Larsen and Toubro, Bharat Forge, UltraTech Cement, Grasim Industries, the fashion and retail part of Aditya Birla Group, Tata Motors and Thermax have temporarily suspended or significantly reduced operations in a number of manufacturing facilities and factories across the country. Nearly all 2-wheeler and 4-wheeler companies terminated their productions till further notice. Hindustan Unilever, ITC and Dabur India have shut manufacturing facilities expect for factories producing essentials. Foxconn and Wistron Corp, iPhone producers, have suspended production following the 21 days lockdown orders.

E-commerce Field

In the third week of March, Multinationals like Amazon, Walmart owned Flipkart decided to only continue the sale of essential items and nothing other than that. BigBasket and Grofers also run restricted services, facing disruptions in services due to the lockdown E-commerce companies also look for legal clarity related to what are "essentials".

On 20 April, Telangana extended the lockdown to 7 May. Swiggy and Zomato like food delivering services are terminated during this extension period.

Defence Field

The Department of Military Affairs led by the Chief of Defence Staff has postponed all capital acquisitions until the coronavirus pandemic recedes. No new major defense deals will be made in the beginning of the financial year 2020–21. While the delivery of S-400 missile systems won't be affected, the delivery of Rafale fighter jets might get affected.

Stock markets Hit Hard!

On 23 March 2020, stock markets in India put up worst case of economic impact by posting worst losses in history. SENSEX fell 4000 points (almost 13.12%) and NSE NIFTY fell 1150 points (nearly 13%). However, on 25th March, one day after a complete 21 day lock-down was announced by the Prime Minister, SENSEX posted its biggest gains in 11 years (ironical right!), adding a value of 4.7 lakh crore (approximately US$66 billion) crore for investors. On 8 April, following positive indication from the Wall Street that the pandemic may have reached its peak in the US, the stock markets in India rose steeply once again.

Estimated Economic Impact

The Indian economy is expected to lose over ₹32,000 crore (US$4.5 billion) every day during the first 21 days of the lockdown, a RBI approved credit rating agency. Barclays said the cost of the first 21 days of shutdown as well as the previous two shorter ones will be total to around ₹8.5 lakh crore (US$120 billion).

On 27 March, Moody's Investors Service downgraded its estimate of India's GDP growth for 2020 from 5.3% to 2.5%. India Ratings & Research also downgraded the FY21 estimate to 3.6%. On 12 April 2020, a World Bank report focusing on South Asia said that India's economy is expected to grow 1.5% to 2.8% for FY21.^[1] This will be the lowest growth for India in 30 years.The World Bank report said that the pandemic has "enlarged pre-existing risks to India’s economic impact outlook". Confederation of Indian Industry (CII) have estimated that India's GDP for FY21 will be between 0.9% and 1.5%.

Confederation of Indian Industry (CII) has sought an economic fiscal stimulus package of 1% of India's GDP amounting to 2 lakh crore (US$28 billion). The fiscal package and fiscal policies approach is being compared to what has happened in other countries such as Germany, Brazil and Japan. Jefferies Group said that the government can spend ₹1.3 lakh crore (US$18 billion) to fight the economic impact of coronavirus. Bloomberg's economists say at least ₹2.15 lakh crore (US$30 billion) needs to be spent.

It is estimated that the loss to the tourism industry will be 15,000 crore (US$2.1 billion) for March and April alone.

Migrant workers and labourers

Due to the lockdown, many of the daily wage labourers were not able to find work(It happened suddenly). At the same time the lockdown restrictions put a stop on the movement of buses and trains. it resulted in large numbers of migrant workers walking back to there villages, some covering journeys hundreds of kilometers long. That also defeated the main aim of social distancing!.

Soon after a central government directive in late March, state governments set up 21,000 camps to house over 660,000 migrants and stop the migration. Delhi government is providing free food to 400,000 people every day. Over 450 hunger relief centres have been set by the Delhi government.

By 5 April, 75 million people were being provided food across the country in government and NGO food camps. To cater to the needs of the migrants and prevent them from leaving the camps, the government of Kerala changed the food being provided by adding north Indian dishes to the menu, providing carrom boards and recharge facilities for phones, as well as provide other medical essentials such as masks, sanitizers and medicines. They will also suffer from the econmic impact that is/is to be triggered by the pandemic.

Lockdown Extended - Economic Impact extended?

On 8 April 2020, the managing director of Bajaj Auto, Rajiv Bajaj, wrote in an opinion piece in the Economic Times that the "lockdown makes India weak rather than stronger in combating the epidemic" and that the current "capricious" lockdown was totally unsustainable and a "recalibration" is needed. Rajiv Bajaj writes that "India may have to sell itself out of the coronavirus crisis"(what!!!).

We always have faced some problems in the past as we are now. Together we were always able to defeat those rigorous situations. And together we will pass this test too.

Economic Impact will be one of the problems we may face, so we need to be ready.

To Dive more deeply into this situation do visit here

STAY SAFE STAY AT HOME.