Impact of coronavirus on Indian economy

THE CORONAVIRUS EMERGED OUT AS THE BIGGEST THREAT TO THE WORLD, BEING AN UNCONTROLLABLE PANDEMIC ONE HAS EVER SEEN, BEFORE LEADING TO SOME OF THE BIGGEST ECONOMIES OF THE WORLD LIKE INDIA, CRUMBLING IT DOWN TO ITS WORST SITUATION EVER.

Indian economy faced the largest contraction ever witnessed before, which is forecasted to be contracting by 5.9 percent in 2020. Due to the coming of rigorous and strict lockdowns, economic activity halted in the first quarter, and from there it seemed very difficult making it back to normal.


The economy has been under a demand depression. The unemployment rate is reaching a new level. Industrial output and profits are going down. All of which are happening together for several quarters now, a supply-side constraint would deliver a big blow, affecting the growth prospects and social and economic wellbeing of a large number of people.

Since the surge of coronavirus cases, a large section of our society or the domestic buyers are refrained from buying a large number of items, especially foodstuff and other services despite a large money supply within the economy due to the sentimental fair with a new dimension leading to the diversion of the society into two different sects, that is, haves and have nots. People with handsome savings are keeping the economy reviving and others are building immense pressure of micro-level inflation on their heads with loss of employment or any other source of income.

In July 2020, the unemployment rate was at 7.43% which was lower than 10.99% in June. Mean-while, April and May this year recorded the highest unemployment rates of 23.48% and 23.52% respectively. Injection of capital into the financial institutions to enhance the liquidity in the economy without declaring any bad loan as NPA would further lead to a major economic threshold. Moreover, India’s bad debt ratio may rise by another 700 basis points due to the coronavirus crisis, the country’s leaders need to raise $20 billion of capital over the next year, of which, state banks will require $13 billion, to build up cash cushions. Rising insolvency would be another issue on the front end.


The devastation could be so higher such that India’s fiscal deficit might balloon up to 14.6 lakh crore in 2021. Due to the restrictions, revenue generators for the country like tourism are expected to be badly hit as many as 9 million jobs – six times the population of goa – in the travel and tourism sector are at risk in India. The sector accounts for 12.75% of employment – 5.56% direct and 7.19% indirect.


A similar fall is also expected to occur in the logistics sector due to which shipping companies, transport services, etc., are expected to decline by 70-80 percent. Moreover, the MSME sector is also one trouble leading to the gross injection of capital that might be risking a large part of people and financial institutions to be at the brink of the edge.


But, however, apart from this, India’s possibility to attract worldwide investors and becoming the world manufacturing sector could become true. In addition, India has shown a remarkable performance in both the IT sector as well as the Pharmaceutical sector.


The Indian pharmaceutical packaging market is expected to grow at a CAGR of 5% over the forecast period 2020 to 2025. India is the third-largest pharmaceutical in terms of volume and thirteenth most significant in terms of value as it has a large raw material base and availability of a skilled workforce. As the vaccine companies all over the world are in a race to deliver the Covid-19 vaccine, all eyes are on India which manufactures 60% of the world’s vaccines. But amongst all other cities in India, Hyderabad is the city that has the capacity to manufacture a third of the global vaccine, a report in Times of India said.


 

By Aditya Verma.

(October 2020)

 

Liked this article? Keep on reading...