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| CoVID-19 Impact on INDIAN Economy (Sector-wise) & How INDIA Can be Benefited |
The entire world is in the clutch of Coronavirus. The dissemination of the virus is so colossal that it compelled the World Health Organisation (WHO) to declare it as a pandemic. The outbreak of the virus has unprecedented implications on the global economy. Severe economic burden and grave consequences have to be borne by the Indian industries in this backdrop of the declining economic situation due to coronavirus. Thus, this write up is intended to study the repercussions of coronavirus on different sectors of the Indian economy & Govt of India's steps to revive the economy.
About Corona:
The outburst of the diseases was first identified in Wuhan, China in December 2019. WHO has been thoroughly monitoring and assessing its global hazards, thus declaring it as a Public Health Emergency of international concern on 30th January 2020. The virus started disseminating at an unprecedented rate in different countries across the globe compelling WHO to proclaim it as pandemic on 11th March 2020. Now the whole world is grappling with this unseeable pernicious enemy.
In India, the first case of coronavirus disease was reported in Kerala on January 30, 2020. Multiple cases were then reported in different cities in India. Hence, the Government of India took necessary action by announcing lockdown in every corner of the country on 24th March 2020. The metropolises of Delhi, Mumbai, Ahmedabad, Kolkata, Chennai are densely populated which has given rise to a spurt in cases of COVID-19 and these cities are the engines for growth and development of Indian economy. The pandemic has led to socioeconomic disruption, inhibiting the growth of the entire economic environment
IMPACT OF CORONAVIRUS ON THE GLOBAL ECONOMY
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| Case of the GLOBAL ECONOMY |
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| Case of INDIAN ECONOMY (a) 8 Core Sector (b) Jobs in Indian Start-up |
IMPACT OF CORONAVIRUS ON THE INDIAN ECONOMY
IMPACT OF CORONAVIRUS ON DIFFERENT SECTORS OF THE INDIAN ECONOMY
Covid-19 has set foot in India and is heading the nation to a major downturn. Coronavirus disease has become a world-changing event and is not only a humanitarian crisis but also an economic and social crisis. Its impact on the business environment is worldwide and manifold. Due to the rapid spread of coronavirus, several entities are bound to limit their business operations leading to disruption in the economic activities of several industries that drives growth. The setback that is being encountered by the different sectors of the economy are highlighted below.
Primary Sector: Primary sector encompasses industries associated with the extraction and production of raw materials. This sector provides employment to about 43.21% of the population in India and contributes about 16.1% of the Indian GDP. It supplies raw materials to the secondary sector and furnishes basic necessities of human life
Agricultural industry:
In the agricultural the sector, due to travel restrictions for lockdown, there has been a dearth of
agricultural workers have resulted in a drop in production. Also, the
pandemic lockdown period coincides with the harvesting season of ‘Rabi’ crop,
but owing to the paucity of labourers the crops unabatedly stays in the field. As
the operations of the businesses like hotels, restaurants, sweet shops and tea shops
are suspended, the market of raw materials which are used for these purpose has
gone down leading to grievances of farmers. There is a significant fall in
revenue of the tea-based industries as they export a substantial part of their the output which is now barred
Mining industry:
The pandemic has curtailed
the overall demand for metals and minerals which has trimmed down their prices.
The mining entities have also experienced a drastic drop in their share prices
Secondary sector: The secondary sector
provides employment to around 24.89% of the population in India and contributes
about 29.6% of the Indian GDP. It embraces industries that produce and
distributes finished goods or in indulged in construction activities, thus
providing support to both the primary and service sector.
Manufacturing industries:
Manufacturing
industries are bearing the brunt of coronavirus as they had terminated their
production at short notice. The value of the inventories that are held up in
the production centres or warehouse of these industries has gone down and the
machinery is too lying idle for a long time. Major hindrance encountered by
the industries are cash flow constraints and supply chain disruption.
- Automobile industry: With almost all plants
shut and imports being sealed up, there is a steep decline in production and
sales of the automobile companies impelling them to declare pay cuts. The situation will be awful even during post lockdown period due to a fall in income
levels
- Textile and Apparel industry: This industry
is the workplace for over 45 million people in the country but temporary closure of
production units have increased their hurdles leading to lay-offs. The
termination of exports and imports have an adverse impact on the spinning mills in
India as the exports of fabric, yarn and other materials have disrupted.
- Pharmaceutical and Chemical industries:
These industries highly count on import of bulk drugs and several raw materials
from China. Due to import restrictions these industries are also impacted.
- Electronic industry: The finish products
plus the raw materials used in this industry is mainly supplied by China. The
spread of coronavirus have pushed down the production and sale of electronic
goods and the supply chain is also interrupted.
- Solar power industry: Solar power project
builders depend on Chinese imports. Around 80% of solar modules and solar cell
used in India are from Chinese manufacturers. Thus, the Indian solar project
developers started confronting a shortage of raw materials and have limited
stock
Construction and engineering industries:
For the construction and engineering industries, the physical presence of massive the labour force is essential which is restrained during the lockdown and the
construction activities have also halted. Thus the industries are tormenting at
the hands of ruthless coronavirus.
Service sector: About 31.9% of the Indian the population is employed in the service sector which contributes about 54.3% of the
Indian GDP
Tourism and hospitality industries:
Tourism
and hospitality are the foremost industries to be severely affected amid
coronavirus crisis and will also be rearmost one to behold resumption of
activities. Lockdown has averted the inflow of tourists dealing a crippling
blow to the tourism and hospitality industries.
Transportation segment:
The pandemic has
put down this segment under massive financial strain. Airlines, cruise and road
cargo operators have been struck hard because of border closure and travel
restrictions. Some of the aviation companies are not even in the position to
refund their customers those who had booked flights that were cancelled due to
lockdown.
Healthcare segment:
According to FICCI, the healthcare segment is at the epicentre of this worldwide pandemic ordeal.
Certain public hospitals have witnessed an increase in demand in the crisis
period. The private hospitals have arisen to the occasion by providing the
government with all the succour it requires
IT segment:
IT segment is reeling under
coronavirus crisis as there is immense dwindle in global deal activities as
well as growth rate. They are downsizing their workforce to tussle with the
presence scenario.
BFSI segment:
Covid-19 has afflicted BFSI
segment by causing upheaval to their business and annual reporting giving rise
to their nonperforming loans. During this emergency situation, the operational
and technical difficulties faced by the employees as well as the customers
spotlighted the lack of agility in the banking and financial system
Media and entertainment industry:
Coronavirus has compelled to postpone the release of several movies, shootings have
come to rest and the theatres cannot screen movies bringing about the heavy loss to
this industry.
Retail segment:
Shutting down of shops and
malls that do not sell necessity goods have brought forth growth in revenue
and considerable job loss. Retail stores selling essential commodities have
witnessed demand for the products exceeding supply engendering bare retail
shelves.
HOW INDIA CAN BE BENEFITED
The pandemic outbreak has got in the way of the Indian economy, but the foremost opportunity that India will get is the reliability crisis for China. The world seems to attenuate its dependency on China. Some countries even have expressed their opinions regarding desisting their trading relationship with China. Coronavirus can wind up being the final curtain on the leading role played by China in the global market since it is the world’s largest manufacturing hub. China’s discomfort can turn into India’s comfort as the turmoil caused by a coronavirus that has originated in China could set the stage for more foreign investments in India which is one of the emerging economies in the world. The countries that are putting aside China can place India in that position. The reasons for which India can grab the place of China can be jot down as follows:
- India is the second-largest country in terms of
population, so the domestic demand in India is
very high. It also has a huge market.
- In India, the average age is 29 years, so there is a
presence of a huge youth population in India.
Therefore, the availability of workforce is high.
The labour is also cheap here
- India is the world’s fifth-largest economy
according to nominal GDP and third largest in
terms of purchasing power parity.
- India has the fourth-largest rail transportation
network and third-largest road network which
can facilitate easy transportation of goods.
- India is the second-largest English speaking a nation in the world.
- Indian products are more reliable than Chinese
products.
- India has cheap digital communication
network and is one of the largest and swiftly evolving markets for digital users. With more
than 56 crores internet subscribers, India has the second-highest number of the internet user
population in the planet.
- The government of India had launched certain
programs like Skill India, Digital India, Make in
India and Smart cities to foster economic growth
which have created a business-friendly the environment in the nation
- The basic amenities that are essential to carry
out a business is much affordable in India, either
it is an infrastructural investment, labour cost,
transportation expenses, food or the internet.
- Besides all this, in India, the judiciary system is
an independent body
How will India bounce back?
The Government of India has a unique opportunity to revitalize and boost up the economic growth through the 3R chain. All these promises will be fruitful only if they are met. The 3R strategy is:
Recycle—Funding government spending needs through the privatization of state-owned enterprise assets.
Rebuild—Aggregating savings by providing tax cuts to the private sector and households.
Reinvest—Providing incentives for manufacturing firms to reinvest such savings to substitute imports and increase the country’s global market share of exports.
I believe that 3Rs should help address India’s cyclical growth challenges through higher government spending, increased savings for the private sector and households, and create more job opportunities by encouraging new investment.
India’s growth is seen recovering sharply to 7.4% in the next fiscal year. The IMF sees India’s FY20 growth at 4.2%, down from 4.8% estimated in January.
Actions taken by the Indian government to boost Indian Economy are:
In the fourth phase of lockdown, the Government of India had decided to open Liquor shops to cover their losses. In the 135crore population of India, half of the population has drinking habit So government firstly take advantage of this opened liquor shops. Excise duty on liquor is the third-largest source of income for a number of states, nearly 10-15% of total tax collection for some states. The ban during the lockdown affected alcohol sales, in turn having a major effect on the state revenue.
From June 8, the government has announced a calibrated exit strategy under which more economic activities will be allowed across the countries. It is the first of the three-phase plan for reopening of prohibited activities in non-containment zones with a stringent set of standard operating procedures that will be in place till June 30.
In this situation India’s use of new digital technologies to process applications for income support and deliver direct transfers to identified individuals or households.
Bearing huge loss due to lockdown, the government of India is now aiming to offer reputed companies to start their businesses in India.
India is also balancing the economic situation in light of China–the United States trade war. Taking advantage of this situation, the government of India is attracting those companies that wish to move out of China or are looking for an alternative to China. The PM’s office is conveying to the government centre and state machinery to be ready with pro-investment strategies.
In mid-May, the German footwear brand, Von Wellx, decided to shift its entire operations out of China and into India. This is a great move for the economy.
“However the Indian Economy is expected to bounce back in 2021“, the World Bank said
@N. RAMCHANDER
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