Impact of COVID-19 on Indian economy: Tough path ahead

Since the dawn of the modern history of the world there are very few instances where the entire globe has shaken and woke up to the situation such like pandemic COVID-19 attack. The lethal virus has twin impact on the society in the form life and living hood. When a nation mulls about the citizens precious life, it has a huge impact on their take home.  There is no respite for the people mostly the vulnerable segment of the society. Now the biggest question arises how much the colossal corona effect on the economy of the country like ours.

In India emergency had been imposed in several forms and in different times since independence but a financial emergency has never been imposed in the history of India as yet. The Press Information Bureau brought out a fact check that stories about a financial emergency being imposed in India are fake. According to the sources, former RBI chief Raghuram Rajan stated that the corona virus pandemic in India may just be the “greatest emergency since Independence”. Similarly former CEA Arvind Subramanian said that India would need a ₹720 lakh crore support to overcome the contraction caused due to the pandemic.

The economic impact of the 2019–20 COVID-19 pandemic in India has been hugely disruptive. World Bank and credit rating agencies have downgraded India’s growth for fiscal year 2021 with the lowest figures India has seen in three decades since India’s economic liberalization in the 1990s. The former Chief Economic Advisor to the Government of India has said that India should prepare for a negative growth rate in FY 21 and that the country would need a ₹710 lakh crore stimulus to overcome the contraction. However, the International Monetary Fund projection for India for the Financial Year 2021-22 of 1.9% GDP growth is the highest among G-20 nations.

The Indian economy lost over around ₹32,000 crore  every day during the first 21-days of complete lockdown which was declared following the corona  virus outburst. Under complete lockdown less than a quarter of India’s $2.8 trillion economy was useful.  Around  53% of businesses in the country will be significantly affected. Supply chains have been come under severe stress with the lockdown confinement in places .In the early part there was a lack of clarity in streamlining what is an “essential” and what is not. Those in the informal sectors and daily wage groups are the most at risk. Most  of  the farmers around the country who grow perishables are also facing  unexpected uncertainty. Various businesses such as hotels and airlines are cutting salaries and retrenching employees.

Major companies in India such as Larsen & Toubro, Bharat Forge, UltraTech Cement, Grasim Industries, Aditya Birla Group and Tata Motors have temporarily suspended or significantly abridged operations. Infantile start ups have been impacted as funding has declined. Fast-moving consumer goods companies in the country have significantly trimmed down operations and are focusing on essentials. Some defense deals have been deliberately delayed due to the pandemic such as the delivery of Dassault Rafale fighter jets. Stock markets in India posted their worst loses in history on 23 March 2020.

According to FICCI sources in India up to 52% of businesses have specified a certain amount of impact of shutdowns caused due to COVID-19 on operations. Various businesses such as hotels and airlines are cutting salaries and laying off employees. Tourism and travel industries which contributes one-tenth of Indian GDP brunt the most of the COVID-19.By the last week of the  April the Unemployment Rate had increased nearly 19% within a month, reaching 26% unemployment across India, according to the “Centre for Monitoring Indian Economy”. Around 14 crore Indian lost employment in the lockdown. More than 45% households across the nation have reported an income drop as compared to the last year.

After assuming and ascertaining the asymmetric losses it is high time to bring on calculative judicious measures to curb the virulent attack impact on economy. The Government of India has announced a slew of measures to tackle the situation, from food security and extra resources for healthcare, to sector related incentives and tax deadline extensions. On 26 March a number of economic relief measures for the poor were announced amounting over ₹170,000 crore . Later in the March the Reserve Bank of India also announced a number of measures which would make available ₹374,000 crore   to the country’s financial system. Similarly the government allowed the movement of all essential as well as non-essential goods during the lockdown. Union government released additional funds to the states for taming the corona virus totaling to ₹28,379 crore . The World Bank and Asian Development Bank have extended their sustainable support to India to tackle the corona virus pandemic.

As the heavy weights of world economies including USA and western countries are bowing down to the lethal attack and situation is becoming more and more alarming day by day, the recovery of 2.8 trillion dollars Indian economy seems to be a distant dream. But never the less as they say tough time perishes but not the tough people. We must toughen ourselves to tackle the torrid time to triumph over COVID-19 to restore our economy even against all odds in the near future.