Effects Of Covid-19 On Indian Economy

Mitali Rana
Apr 27, 2020   •  58 views

COVID-19 appears to have first emerged in Wuhan, China. The outbreak has since spread across China to other countries around the world. By the end of February, the new corona -virus had been declared a public health emergency of international concern by the WHO. It has affected many human lives also causing a deep impact on our economy. A world pandemic threat COVID-19 mitigation is crucial to the human life and for reducing distortion of livelihood. India is facing its biggest crisis in decades, with a three-week lockdown in a nation of 1.3 billion people which is likely to result in economic recession, millions of Job losses and possible starvation among the poor despite of effective supply chains. This 21 days lockdown has resulted into several outdoor trade restrictions which results into downfall of our economy. Despite of precautions and safety measures, India is affected by this epidemic but still can be considered decently better than other already affected countries.

All countries experiencing lockdown worldwide are feared with a global collapse of financial markets. In this situation clubbed with inactive economic growth in the previous years, especially in a developing country like India is leading to extremely volatile market conditions. World economy at this time has collapsed. All the countries currency is getting weaker against Dollar. Major impact was recognized in the Mexican countries were there was downfall by 14.9% against dollar, whereas Indian Rupee experienced 3.8% downfall against dollar.

The GDP (Gross Domestic Product) of India between 2018-19, was 6.65%. It is estimated to go down in the first two quarter of 2019-20. It is estimated that in 2020-21, the India’s growth might slip to 5.3% to 5.7%.

This Lock-down is likely to have a sizeable impact on the economy, most significantly on consumption which is the biggest component. India experienced fluctuations at the demand and supply side and the need of different commodities are not fulfilled which results in increase in the import of goods from foreign countries ultimately affecting our economy.

Effects of COVID-19:

1. Around 37% of regular wage/salaried employees in urban India are informal workers, who will face uncertain income following the stalling of urban activity.

2. The price war between large global players, together with an increasing dismal outlook for the global economy, has led to a steep decline in oil prices.

3. Demand shocks are expected to hurt India’s textile exports over the next few quarters. The textile and apparel sector production is expected to decline by 10-12% in the April-June quarter.

4. With a shutdown of all the non-essential services, the demand for commercial vehicles is expected to plunge further.

5. Large scale cancellation, Indian Association of Tour Operators (IATO) estimates the hotel, aviation and travel sector together may incur loss of about Rs. 85 billion due to travel restrictions imposed on foreign tourists.

6. India is sixth largest chemical producer in the world. Majority of chemical producing units are Small and medium enterprises (SMEs) and do not have a buffer to meet sudden increase in working capital requirements. Extension of credit to customers and suppliers alongside falling revenues in the short to medium term is expected to adversely affect cash flows etc...

The impacts recognized in different sectors differ in magnitude;

  • The High impact sectors in terms of risk on account of COVID-19 are aviation, hotels, restaurants, jewelers, retails, shipping, ports and port services.

  • The medium impact sectors are automobiles, building materials, residential real estates.

  • While low impact sectors include education, dairy products, fertilizers, FMCG and healthcare among others.