IMPACT OF COVID19 ON INDIAN

ECONOMY
Sanjeev Chaddha
 Caselet 1
• Ram Singh is a small farmer in Jalandhar
district of Punjab. He owns two acres of land.
What is the impact of lockdown due to COVID
on him.
 Caselet 2
• Mr Om Prakash is a businessman who runs a
small unit for manufacturing egg trays. What
is the impact of lockdown due on him.
 Caselet 3
• Mr Michael is a tour operator who runs a
travel Shoppe. What is the impact of lockdown
on him.
 Caselet 4
• Arun Malhotra is a professional who works for
a company. He received his salary for the first
month of the lockdown but is worried about
his fututre.
 Caselet 5
• Gobind Ram is a migrant worker from Bihar
working as a street vendor in Mumbai. Since
lockdown he is a worried man. What is the
impact of lockdown due to COVID on him.
 Caselet 6
• The Government of a state in India is worried
as all revenue sources have dried up due to
lockdown and the expenses have increased .
What should the state Government do to
survive.
 Caselet 7
• The daily needs shop run by Mr Pawan Kumar
in sector 49 of Chandigarh witnesses huge
rush of people during lockdown. The goods
are flying off the shelf very fast. What should
he do ?
 Objectives
• To understand Impact of lockdown due to
COVID 19 on the Primary, Secondary and
Tertiary sector of Indian Economy.
• Impact on Selected sectors of Indian economy
• Opportunities hidden within the threat
• Measures taken by Indian Govt. to mitigate
• Measures suggested to improve the economy
 Introduction
• COVID-19, discovered in Wuhan, China, in
December 2019
• a pandemic status-WHO
• adversely impacted the entire globe.
• 195 countries --- worldwide
• 7.5 million affected
• 1.3 million dead
 India
• More than 300,000 affected
• More than 9000 dead
 Lockdown
• One day Janta Curfew on 22.03.2020
• Lockdowns / Curfew- 24th March
• Unlock – 1st week of June 2020
 Pre Pandemic Situation
S No. Financial Year GDP Growth %age

1. 2015-16 8

2. 2016-17 8.3

3. 2017-18 6.6

4. 2018-19 6.1

5. 2019-20 4.2

6. 2020-21 (-) 5

7. 2021- 22 ?
 Economic domain
• Severely affected health sphere - economic
domain -
» domestic slowdown
» international recession
» Overall uncertainty
» lack of demand
» no investment foreseen
 Effect on major contributors to the
GDP
• All the three pillars of our country -adversely
affected
– private consumption
– investment and
– external trade
 Impact of Lockdown
• Slowing demand
• Closure of manufacturing activities
• Fall in the global crude oil prices
• Ban on foreign trade
• Reduction in the commodities prices like
metals, fertilizers and energy
• Curbs on the tourism, hotels and aviation
industry
 Loss assessment
• UN Report- India worst affected economies
due to COVID 19 - negative trade impact of
more than USD 350 million.
• Asian Development Bank - estimated loss of
USD 29.9 billion to Indian economy due to this
outbreak.
• Barclays estimate the cost of lockdown -
around INR 8.5 lakh crore (US$120 billion).
 Impact of lockdown due to COVID 19 on the
Primary Sector

• Labour availability
• Inability of the farmers to access markets for
produce due to issues in transportation as well
operation of markets.
• Commercial crops have become non
remunerative– rise in labour charges
• Lost more than two third income/total loss
 Impact of lockdown due to COVID 19 on the
Secondary sector
• Up to 53% of businesses have indicated some
impact on their operations due to COVID-19
lockdown. (FICCI Survey)
• Stress on the supply chains of essential
commodities
• Focused on the production and supply of
essential items only
• Major companies -Larsen & Toubro, Bharat Forge,
UltraTech Cement, Grasim Industries, Aditya Birla
Group, BHEL ,Tata Motors – Production
temporarily suspended
Impact of lockdown due to COVID 19 on the tertiary
sector

• Estimated loss to the tourism industry -INR

15,000 crore (US$2.1 billion) for March and
April alone.
• The live events industry -estimated loss of Rs.
3000 crores plus.
• Revenue of Ola Cabs went down nearly 95% in
March-April resulting in 1400 layoffs
• Hotels and airlines cut salaries and laid off
employees
 MSME sector

• MSME sector accounts for

• 33.4% of India’s manufacturing output
• employing about 120 million
• generating 45% of India’s export and
• contributing more than 30 per cent of the GDP
• Huge distress –
• demonetization,
• implementation of GST
• prolonged economic slowdown
• COVID-19
 MSME Sector
• Large dependence on China for its raw
material.
• Lockdown responsible for- shrinkage of
exports, cessation of production, non-
availability of manpower, the uncertainty of
consumption, and liquidity squeeze in the
market
 Employment Generation
• Jobless Growth 2000s onwards
• Between 2012 - 2018, India lost 6.1 million jobs
• Unemployment increased from 8.4 percent to 31
percent May, 2020 (CMIE Data)
• Labour Force Participation Ratio shows a decline
from 44.6 percent in January 2016 to 35.5
percent in the second week of April, 2020.
• Implies workers opted out of job
 Income levels
• All kinds of households--whether dependent on
primary, secondary and tertiary activity or region-
wise rural as well as urban--have received a blow
• Fall in Income- increased from a mere 12 percent
in April 2019 to a whopping 48 percent by April.
(CMIE Data)
• Shows impact of halting of economic activities
and the consequent loss of livelihoods to millions
of households
 Tax Collection
• Revenue collection for both state and central
governments became negligible
• States demanded -relaxing liquor sale norms.
• Central government earns INR 2.48 lakh crores
from excise duty on liquor annually
• April collection of GST lower than March's
earning of INR 97.6 thousand crores, falling
short of the minimum target of INR 1 lakh
crores.
 Informal sector
• More than 90 percent of the workers are from the
informal sector
• India has around 40-50 million seasonal migrants also
• Thrive on daily work and daily cash with little
provisions of employment protection
– Economic activities standstill
– factories are not running
– establishments are closed and
– most markets are shut
– disruption in work, wages/income and food--all three
interconnected--for crores of people in India.
 Start ups
• A number of young start-ups have been
impacted as funding has fallen.
• A Data Labs report shows a 45% decrease in
the total growth-stage funding (Series A
round) as compared to Q4 2019.
 Stock Markets
• Financial markets in India are witnessing sharp
volatility currently as a result of the fallout in
global markets
• S&P BSE Sensex which was 42273 points on 20
January, 2020 is 29894 points on 08 April, 2020
• The price to Earnings Ratio of Sensex is less than
18 (P/e is 17.81 on 31March, 2020) which is far
less than the historical range between 20-24.
 Impact on Tourism
• The travel & tourism industry has been very
severely affected
• The Indian Association of Tour Operators (IATO)
estimates the hotel, travel and aviation sectors to
incur losses of up to Rs 8,500 crores.
• Cancellation of tickets, refunds and low utilization
rate of airlines.
• The Indian cinema industry will likely face a loss
of INR 200–250 crores over the next 2–3 months.
 Impact on Auto Industry
• In passenger cars alone, production reduced by
240,000 units (10% of total annual production).
• Loss of over INR 2,300 crores in revenue per day on
average, aggregating to over INR 48,700 crores (2% of
total automotive industry revenue) over 21 days.
• Financial compulsions and low sentiment may drive
roughly 35–40% of consumers to defer their vehicle
purchase decisions – on unlocking
• Annual sales of light motor vehicles and motorcycles
are estimated to fall by 4.2 million units in 2020.
 Impact on Retail
• FMCG companies and retailers are dealing
with challenges
– surge in demand & depletion of inventory
– reduction in workforce and
– supply chain disruption
Panic-induced stockpiling meant supermarket
shelves were getting empty faster than they could
be replenished.
 Impact on Retail
• As retailers struggle to deliver orders, innovative
delivery models are emerging.
– Big Basket and Flipkart tied up with Uber and Swiggy
for last-mile delivery of essential items
– Zomato launched Zomato Market service to deliver
groceries from retail stores, and
– ITC partnering with Domino’s Pizza for zero contact
delivery of Aashirvaad brand of atta and spices
– The FMCG players such as HUL, Godrej, and ITC have
restarted production of essentials goods at select
plants, albeit at reduced capacity utilization.
 Impact on Logistics
• With the movement of people/passengers
restricted amid the lockdown, revenues have
taken a hit in the railways, bus, airline, and cab
segments of the transportation sector.
• Output in factories has decreased drastically
and fewer trucks are on the road.
• Activity at seaports has ceased with a decline
in export-import trade.
 Impact on Logistics
• Other issues -are slow custom clearance, the
inability of clearing and forwarding (C&F)
agents to ply the required cargo from ports to
CFS/ICD, and time-consuming manual stuffing
and de-stuffing of containers and
documentation / cargo handling.
• Rail freight has been affected as the demand
and supply of high volume bulk cargo are
subdued
 Opportunities amongst threats
• Digital & Internet Economy
• Online-Skill development
• Online Groceries
• Digital Content
• Specialty Chemicals
• Pharma
• Atmnirbhar Bharat – Alternative to China
 Dynamic Changes
• Data is the new King
• Death Knell of Debt instruments
• Future Uncertain-
• jump in entertainment, travel, tourism on reopening
• Waste management , construction material,
transportation demand to increase
 Govt. measures to mitigate economy
• Food security
• Extra funds for healthcare and for the states
• Sector related incentives
• Tax deadline extensions
• Economic relief measures for the poor - over INR
170,000 crores (US$24 billion).
• RBI- announced INR 374,000 crores (US$52
billion) package to the country's financial system.
• To protect Indian companies , the Government
changed India's foreign direct investment policy.
 Govt. measures to mitigate economy
• The Department of Military Affairs-All Capital
acquisitions postponed .
• India to minimize costly defence procurement
• PM announced economic package worth INR
20 lakh crores (US$280 billion), 10% of India's
GDP, with emphasis on India as a self-reliant
nation.
 Suggestions
• Improve demand by injecting liquidity
• Universal Cash Transfer
• Incentives to corporates for capital spend
• Build Infrastructure
• National Employment Guarantee Scheme on
lines of MNREGA
 Suggestions
• Banks/FIs/ NBFC – lend collateral free loans -
more to tiny/ SSI/ Micro sector
• Banks- Pass rate cuts to customers
• Reduce Income Tax/ Corporation Tax rates
• Simplify GST and less tax slabs
 Thank You
drsanjeevchaddha@gmail.com
91 8727857116