Thursday, January 7, 2021

Effects of the COVID-19 pandemic on the Indian economy

Effects of the COVID-19 pandemic on the Indian economy is extremely disturbing. nobody has been spared of its ill effects. Economies of about 100 plus countries are destroyed out of which a number of them have asked for monetary help from IMF. Businesses across the planet namely hospitality, entertainment, aviation etc have seen a serious negative impact. Various sports events like IPL and Olympics are postponed. Schools and colleges are closed. The virus has also disrupted the functioning of varied online giants like Amazon. Countries like USA, Italy and Spain are suffering the foremost since their price is extremely high.

 

Effects of the Covid -19 on Indian Economy:

Effects of the COVID-19 pandemic on the Indian economy. There is an enormous shift within the world economic market and therefore the share market has witnessed crashes day by day. Factories, Restaurants, Pubs, Markets, Flights, Super Markets, Malls, Universities and Colleges etc. were pack up . Fear of corona virus has limited the movement of the individuals. People weren't even getting to buy the daily essentials and these all were somewhere impacting the economy of the planet as an entire . The Organization for Economic Co-operation and Development (OECD)reveals that they need cut their expectation for global growth to 2.4% from 2.9%, and warns that it could fall as low as 1.5%.

India faces an enormous decline in government revenues and growth of the income for a minimum of two quarters because the coronavirus hits economic activity of the country as an entire . A fall in investor sentiment impacts privatization plans, government and industry.

The lockdown in India will have a sizeable impact on the economy mainly on consumption which is that the biggest component of GDP, Effects of the COVID-19 pandemic on the Indian economy.

India’s total electronic imports is adequate to 45% that of China. Around one-third of machinery and almost two-fifths of organic chemicals that India purchases come from China. For automotive parts and fertilisers China’s share in India’s import is quite 25%. Around 65 to 70% of active pharmaceutical ingredients and around 90% of certain mobile phones come from China to India.

 

Effects of the COVID-19 Indian economy,  Effects of the COVID-19 pandemic on the Indian economy

Disruption of supply chain and global trade

Covid-19 has disrupted global supply chains and this is often generating spill over effects throughout different levels of supplier networks. Global trade 2020 will fall in every region of the planet, and can affect all sectors of the economy. this may impact countries that are strong exporters (no output for his or her local companies), but also people who are importers (lack of raw materials). Effects of the COVID-19 pandemic on the Indian economy, the planet Trade Organization (WTO) expects global trade to fall up to 32% this year thanks to the coronavirus pandemic.

 

Employment

  • COVID-19 impact on unemployment rate in India 2020
  • COVID-19 impact on jobs in India 2020, by age group
  • COVID-19 impact on number of people employed in India 2020
  • COVID-19 impact on labor participation rate in India 2020

 

Businesses

  • Effects of the COVID-19 pandemic on the Business Size of organized market India FY 2019 by sector
  • Estimated economic impact from COVID-19 in India 2020 by market
  • Impact of COVID-19 on future of startups and SMEs India 2020
  • COVID-19 impact on cash funds of startups and SMEs India 2020
  • Future strategy of equity investors due to loss by COVID-19 outbreak in India 2020

 

Retail and consumption

  • Retail and recreation mobility changes during COVID-19 in India 2020 by state
  • Reasons for not visiting restaurants after COVID-19 lockdown India 2020
  • Opinion on shopping for non-essentials after COVID-19 lockdown relaxation India 2020
  • COVID-19 impact on media consumption India 2020 by type of media
  • Opinion on online deliveries after COVID-19 lockdown relaxation India 2020

 

Relief and financial aid

  • Value of government aid to combat COVID-19 in India April 2020
  • Impact of government aid to combat COVID-19 in India September 2020
  • Top ten states by number of people fed during COVID-19 lockdown in India 2020
  • Government shelter homes during COVID-19 in India 2020 by state
  • Lifestyle

 

COVID-19 lockdown activities in India 2020

  • Share of mobility changes during COVID-19 in India 2020, by location
  • Fears and concerns with regard to COVID-19 in India 2020
  • Level of fear of contracting COVID-19 India 2020 by age group

 

India has become the world’s new hotspot for the COVID-19 pandemic as infection cases have surged in recent weeks. On September 7, India overtook Brazil with 4.2 million confirmed cases to become the country with the second-highest number of confirmed cases within the world. On September 16, the entire number of confirmed cases surged past five million. If the present trend continues, India may soon become the world’s worst-hit country, surpassing the US.

With quite 84,000 people succumbing to COVID-19 infection thus far, India’s price is that the third highest within the world after the US and Brazil. Unlike the US and Brazil, India’s daily increase in COVID-19 cases shows no sign of decline. Effects of the COVID-19 pandemic on the Indian economy. Since mid-August, India has been recording the world’s largest daily increases in coronavirus cases. Effects of the COVID-19 pandemic on the Indian economy, within the second week of September, new COVID-19 cases averaged nearly 90,000 per day in India. While the planet is currently witnessing the second wave of infections, India has not been ready to flatten the primary wave curve.

Even though higher testing is critical to contain the virus outbreak, testing facilities in India are beefed up only since mid-August. Effects of the COVID-19 pandemic on the Indian economy,  Measured on a per capita basis, India remains far behind other countries within the number of tests. Currently, the amount of COVID-19 tests per million population in India stands at 42,000 ― rock bottom among countries with large outbreaks of the coronavirus.

Except for the COVID-19 case deathrate (CFR) witnessing a decline, the remainder of the indications are strikingly worrisome in India. Experts believe that the CFR isn't a meaningful metric for India because it doesn't capture truth level of transmission thanks to the low testing rate and age factor. Besides this, many deaths may go unreported in rural areas.

Although the Central government insists that there's no community transmission in India, the health officials of Himachal Pradesh, Kerala and West Bengal have admitted that there's community transmission of the coronavirus in their respective states.

More worrisome is that the coronavirus is fast spreading to rural and remote areas of the country that lack testing, treatment and tracing infrastructure. Since July, coronavirus cases are surging in villages and little towns. Effects of the COVID-19 pandemic on the Indian economy, Even the remote Andaman and Nicobar Islands have reported quite 3,300 confirmed cases of COVID-19. within the absence of basic health infrastructure, containing the spread of the coronavirus is far harder within the rural hinterland.

 

Unparalleled economic blow

Effects of the COVID-19 pandemic on the Indian economy. On March 24, 2020, Prime Minister Narendra Modi imposed a nationwide lockdown that remained in effect until May 31. Unlike other countries (such as Germany, Italy and Thailand), the lockdown in India didn't help in containing the spread of the coronavirus. Effects of the COVID-19 pandemic on the Indian economy, Infection cases kept on increasing despite India being in lockdown.

The abrupt nationwide lockdown imposed across India was the most important within the world, forcing 1.3 billion Indians to remain indoors. The lockdown restrictions were imposed with none preparation or coordination with states. it had been also one among the foremost stringent lockdowns enforced within the world. apart from some essential services and activities, the remainder of India’s $2.9 trillion economy remained shuttered during the lockdown period. Economic activity came to a grinding halt within the country. The lockdown had devastating impacts on an already slowing economy and people’s livelihoods as shops, eateries, factories, transport, services and business establishments were shuttered.

As per official data released by the Ministry of Statistics and Programme Implementation, the Indian economy contracted by 23.9% within the April-June quarter of this financial year . this is often the worst decline ever recorded since India started compiling GDP statistics on a quarterly basis in 1996.

 

Growing stress within the banking sector

 Effects of the COVID-19 pandemic on the Indian economy. Without a doubt, the COVID-19 pandemic has amplified the prevailing vulnerabilities of India’s banking sector, particularly of banks and non-bank finance companies (NBFCs). The NBFCs were hit by a credit crunch in 2018 when Infrastructure Leasing and Financial Services (IL&FS) ― a serious NBFC ― collapsed. While the banks, particularly the general public sector banks, still suffer from high nonperforming loans.

Since April 2020, not only has credit growth of banks bogged down , but more importantly, their asset quality has also deteriorated sharply. Consequently, nonperforming loans concerning retail and MSME segments are on the increase . In its Financial Stability Report (July 2020), the Federal Reserve Bank of India has estimated that under a really severe stressed scenario, the gross non-performing assets of the banking sector could rise to 14.7% by March 2021 from 8.5% in March 2020. Effects of the COVID-19 pandemic on the Indian economy the increase in non-performing assets would end in higher credit costs, which successively would adversely impact banks’ loss-absorbing buffers and profitability.

To provide targeted relief to bank borrowers, the K.V. Kamath committee has selected 26 sectors which will require loan restructuring and has listed the financial parameters which will be considered within the restructuring of loans suffering from the COVID-19 pandemic. The committee found that 29.4% of the entire banking debt was impacted by the pandemic alone while another 42.1% was already facing stress before the outbreak. In total, 72% debt of the banking sector has been impacted by the pandemic. Effects of the COVID-19 pandemic on the Indian economy, Given the continuing rise in COVID-19 cases, some borrowers might not be ready to meet the strict requirements suggested by the committee thereby contributing to higher levels of nonperforming loans within the banking sector.

Make no mistake: the strain within the banking sector is widespread, not only restricted to public sector banks. Several private banks also are facing capital shortfalls within the wake of the pandemic. Even urban cooperative banks aren't in good financial health thanks to a spike in their nonperforming loans and losses. Some small urban cooperative banks cannot meet the minimum regulatory capital requirements.

 

Capital shortages: myth or reality?

India, just like the remainder of the planet , is facing an acute “scissors effect” of decreasing tax revenues thanks to subdued economic activity and rising expenditure thanks to a better demand for health and social protection within the wake of the COVID-19 pandemic. The tax revenues have fallen steeply since the virus outbreak. Both direct and tax collections are lagging way behind targets. an equivalent is that the case with non-tax revenues. Needless to feature , fiscal deficits are rising in India et al. .

Is there how out? Yes. There are ways and means to boost additional financial resources to fight against the COVID-19 pandemic. One option is to hunt grants and loans from bilateral development agencies and multilateral financial institutions to satisfy rising health and social protection expenditures. In May, the planet Bank approved a fast-track $1 billion support to supply supplementary benefit to poor households. India could also seek similar concessional loans from other development banks and IFIs to finance health and social protection programs.

A second option is to issue rupee-denominated government bonds as both Central and state governments heavily believe this instrument to satisfy operational and developmental expenditures. If need be, the Central government could also issue rupee-denominated debt instruments (COVID Bonds) in offshore markets and use the proceeds to finance health and social protection measures in India.

A third option is to introduce a wealth tax and impose higher taxes on the super-rich individuals. we've discussed elsewhere how substantial revenues might be raised fairly and efficiently by introducing wealth taxes on wealthy individuals to satisfy COVID-19-related costs.

The proposal made by Indian Revenue Service Association to introduce a further one-time COVID-19 relief cess of 4% on taxable income of over Rs 1 million is worth considering because the Central government could mobilise a further revenue of Rs 150 billion ($2 billion) on this account.

Further, nothing stops the central government from rolling back its recent decision to scale back corporate taxes that entails huge revenue loss to the exchequer. within the same vein, the govt can re-introduce the improved surcharge on super-rich individuals that was withdrawn struggling from foreign investors in August 2019.

Another option for the Central government is debt monetisation, under which the Federal Reserve Bank of India would buy bonds directly from the govt . Given the profound economic effects of the pandemic, many governments round the world are considering such unconventional measures. Contrary to popular perception, the Fiscal Responsibility and Budget Management Act allows the RBI to directly buy government bonds on the first market just in case of emergencies. Hence, legally speaking, India could adopt debt monetisation under the exceptional circumstances of the COVID-19 pandemic.

Spend billions to save lots of trillions

There is still time for a course correction. The Indian government must act fast and boldly in developing a coherent economic recovery strategy aimed toward stimulating domestic demand by raising wages of these who at rock bottom of the economic pyramid besides strengthening health and social protection systems to mitigate the social and economic fallout of the COVID-19 pandemic.

 

Vaccine delivery: subsequent big challenge

At present, nobody knows when a coronavirus vaccine are going to be available in India. Most health experts believe that a vaccine could also be developed by the center of 2021. now's the acceptable time for the Central and state governments to hold out preparatory work for the assembly and distribution of a vaccine once it's developed and approved. Effects of the COVID-19 pandemic on the Indian economy they ought to compute partnerships with private drug companies, hospitals, public health groups, international agencies and other stakeholders to form , procure and distribute the coronavirus vaccine in India.

Thanks to a homegrown generic pharma industry, India has the capacity to supply many many doses coronavirus vaccine. But India’s real challenges lie elsewhere. Administering a vaccine to 1.3 billion people would be a challenging task because India currently lacks logistical infrastructure (such as refrigerated storage and transport facilities) to deliver coronavirus vaccines at subzero temperatures across the country, especially in rural and remote areas. Besides, India also faces a severe shortage of healthcare personnel. It could take quite a year to urge every Indian vaccinated for coronavirus.

 The fair and equitable distribution of the vaccine is equally important. the govt must bear the whole expenses of distributing vaccines for poor citizens. If need be, price controls should be introduced to form it affordable by everyone. the govt should also start developing guidelines and priorities for equitable distribution of the COVID-19 vaccine.

 

Safeguarding livelihoods

The hastily imposed lockdown resulted within the loss of many jobs and triggered a mass exodus of internal migrants from urban centres to rural areas. As far as job losses are concerned, the COVID-19 pandemic has no parallel within the post-independent India. Effects of the COVID-19 pandemic on the Indian economy the buyer Pyramids Household Surveys administered by the Centre for Monitoring Indian Economy show a pointy rise in unemployment rates within the range of 8.35% to 23.52% during April-August 2020.

As an outsized number of micro and little enterprises have started shutting their businesses, the most important worry is that many jobs might be lost permanently, which successively , will dampen consumption and can have a consequence on the entire economy.

Out of labor and facing an uncertain future, an estimated 10 million migrant workers returned to their native places after the imposition of lockdown. what's shocking is that neither the Central government nor state governments have data of migrant workers who lost their jobs or lives during the lockdown.

 

Conclusion

Effects of the Coronavirus pandemic on the Indian economy A global recession now seems inevitable. But how deep and long the downturn are going to be depends on the success of measures taken to stop the spread of COVID-19, the consequences of state policies to alleviate liquidity problems in SMEs and to support families under financial distress. It also depends upon how companies react and steel oneself against the re-start of economic activities. And, above all, it depends on how long the present lockdowns will last.

The country is facing an additional ordinary challenging time during this fiscal year . Effects of the COVID-19 pandemic on the Indian economy. India has got to urgently find how to cushion the demand side shocks induced by potential lockdowns and other ongoing containment measure.

Developing countries like India has more fragile economic and social fabric and therefore the present situation will create more suffering for the unorganizedsectors and migrant labour. Borrowing the words of former RBI governor C Rangarajan “Government of India must provide lifelines to businesses - extend loans and tax waivers to small businesses and therefore the self-employed to retain staff -- give mission to severely affected industries and supply more funds to states, tax waivers to households etc.”


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