BD20037

Effect of COVID on the Indian Economy

The Indian Economy had been facing stagflation, that is, stagnant inflation, some
quarters prior to the COVID pandemic, which originated from the Wuhan province of
China and propagated to the Indian subcontinent in mid of March 2020. India already
was witnessing monetary rigidity and the effects of those being increase in NPAs for
banks, Reserve Bank of India(RBI) reducing the Repo rate and giving out relaxations
to banks, Public Sector Units getting privatized due to losses and some other
government policy failures like Demonetization where 99% of the money was
brought back into the system, according to an RBI report. The 2020 budget was
awaited with a lot of enthusiasm among people as it was expected to bring in direct
benefits to the end consumer to boost demand and capacity utilization of firms. While
the budget did give relaxations to the lower income brackets in terms of income tax
exemptions, it was unable to induce or inject any sort of immediate demand booster.
With MSMEs already facing the sharp end of the stick, many getting out of business
and schemes like the MGNREGA failing in its implementation, COVID for India was
no lesser than the final nail in the coffin. A sudden lockdown imposed disrupted the
entire supply chains of all the sectors, pharmaceutical and health care being the only
exceptions. Many people in the supply chain lost their jobs in the initial couple of
months itself. Even the laborers did not find work for months and eventually had to
return to their natives to figure things out and the migrant labour crisis was the true
anatomy of the country, we truly saw the feeble structure we had created for the
working population and it was a complete hara-kiri.

The services industry was the worst hit. Tourism, hospitality, travel, transportation,
media, entertainment; everything came to a standstill. Whilst OTT platforms were still
working and actually witnessed a huge rise in the number of subscriptions, new
production was stagnant. While all these sectors were clearly trembling, some sectors
saw COVID as a blessing in disguise. The Ed Tech market saw a 200% boost with
firms like BYJUS and Unacademy taking over the conventional markets share. The
huge Indian market of coaching classes is essentially taken up by Ed Tech industry
and is most likely expected to retain status quo even after the pandemic is done away
with. The furniture and house accessories market saw a huge rise in sales due to the
sudden rise of the Work From Home culture, which once looked like a mere
hypothetical scenario, now a reality. With all these sectors trying to make use of the
abrupt changes in the economy, some sectors could really not do anything than reduce
the costs and sit tight to phase of this horrendous pandemic and hope to restart with
minimal damage.

The housing sector has become stagnant due to low demand and is not expected to
rise any time soon due to it being the last of concerns for the slim back pockets of the
common person. Although tourism has opened up to an extent, the apprehensions are
real and very few actually will opt to get a lavish vacation in the middle of this utter
chaos. The oil and gas sector is now slowly resurrecting with the opening up of
transport facilities and supply chains of major sectors, especially the E-commerce and
FMCG. E-commerce has been one other sector which has gained popularity in the
otherwise shrimp Indian market awareness. COVID has forced people to use
technology to order all kinds of products, be it as basic as Washing powder, to as
luxurious as an Air Conditioner. This has also lead the normally conventional retail
selling businesses to have their online presence in order to not miss the sailing ship in
this paradigm shift.

The pandemic has not only changed the product preferences and the advent of the
shift to alternate products, but actually led to changes in buying patterns of
consumers. To give an example, consumers would rather buy casual work from home
clothes than office wear, because of the sheer decrease in the utility. Subscriptions to
OTT platforms makes more sense than having a monthly pass for PVR cinemas. All
this has brought about major opportunities as well as threats of extinction for different
industries and suddenly, the already set mechanisms are rendered useless, SOP’s have
become redundant to an extent, and creative thinking and the ability to figure out
heuristics have kept new firms or flexible firms in good stead.

To back all of this, lets focus on some numbers and data to substantiate the findings
and statements better. India's development in the final quarter of the monetary year
2020 went down to 3.1% as per the Ministry of Statistics. The Chief Economic
Adviser to the Government of India said that this drop is for the most part due to the
COVID pandemic impact on the Indian economy.

The World Bank and rating offices had at first reexamined India's development for
FY2021 with the most minimal figures India has found in thirty years since India's
monetary progression during the 1990s. In any case, after the declaration of the
monetary bundle in mid-May, India's GDP gauges were minimized much more to
negative figures, flagging a profound downturn. (The evaluations of more than 30
nations have been downsized during this period.) On 26 May, CRISIL declared that
this will maybe be India's most exceedingly terrible downturn since freedom. State
Bank of India research assesses a compression of over 40% in the GDP in Q1 The
withdrawal won't be uniform, rather it will contrast as per different boundaries, for
example, state and area. On 1 September 2020, the Ministry of Statistics delivered the
GDP figures for Q1 (April to June) FY21, which demonstrated a compression of 24%
when contrasted with a similar period the prior year.

With such disruptive numbers, it is expected for India to have a V shaped recovery, in
which the 2nd last quarter of the fiscal year 2020-21 is expected to have started
recovery. The sectors can be divided into undisturbed sectors, slightly disturbed and
hugely disturbed. The undisturbed sectors like health care, pharmaceutical sectors are
expected to gain even more relevance and not really see any changes post pandemic
as well, in terms of economy. Of course, apart from the firms which will be successful
in providing a vaccine. Pfizer has actually launched their vaccine and claim to have
90% effectiveness in the 3rd stage of its testing. The slightly disturbed sectors like the
FMCG and Education have already found ways to resurrect and keep the top line
afloat. The very reason they have been able to do so is the availability of alternate
means of business operations and more importantly, them being the fundamental basic
needs. The worst hit sectors, were the ones that fed the rest in supply chains or the
ones having luxurious aspects like oil and gas, tourism, etc. These are expected to
have a very slow and gradual demand increase and will render a lot of businesses
close.
In order to understand the post pandemic or the current recover pattern, it is important
to focus on the current economic standing. In India up to 53% of associations have
decided a particular proportion of impact of terminations caused due to COVID on
exercises, as per a FICCI review in March. By 24 April the joblessness rate had
extended practically 19% inside a month, showing up at 26% joblessness across India,
according to the 'Center for Monitoring Indian Economy'. Around 140,000,000 (14
crores) Indians lost work during the lockdown. Over 45% nuclear families the nation
over definite a compensation drop when stood out from the past year. Various
business, for instance, lodgings and airplanes cut remunerations and laid off
employees. Revenue of transport associations, for instance, Ola Cabs went down
practically 95% in March–April achieving 1400 layoffs. It was evaluated that the
hardship to the movement business will be 15,000 crore (US$2.1 billion) for March
and April alone. CII, ASSOCHAM and FAITH measure that a gigantic bit of the
workforce related with the movement business in the country faces unemployment.
Live events industry saw a normal loss of 3,000 crore (US$420 million).

Different young new organizations have been influenced as financing has fallen. A
Data Labs report shows a 45% decrease in the total advancement stage sponsoring
(Series A round) when diverged from Q4 2019. According to a KPMG report interest
in Indian new organizations has fallen over half in Q1 2020 from Q4 2019.

Force use has declined unequivocally after the public lockdown was requested. It was
practically 30% underneath common levels at the completion of walk and remained a
quarter underneath normal levels in April. In May it was on an ordinary 14 percent
underneath common and in June it was up 'til now 8 percent underneath run of the
mill. Lower power use recommends lower financial development. Already, a unit of
extra financial activity in India has been connected with 1.3 units additional force use.
The financial impact has recently been between $160 billion(5.6 percent of GDP)and
$175 billion(6.0 percent of GDP).

Government pay has been genuinely affected with run after grouping going, and
hence the public authority has been endeavoring to find strategies for diminishing its
own costs. On 10 May 2020, Union Minister Nitin Gadkari said that a couple of states
required more money to pay rates in the nearby future. In April, past Reserve Bank of
India supervisor Raghuram Rajan said that the Covid pandemic in India may
essentially be the "best emergency since Independence", while the past Chief
Economic Advisor to the Government of India said in April that India should prepare
for a negative improvement rate in FY21.

The Indian economy was depended upon to lose over 32,000 crore (US$4.5 billion)
reliably during the underlying 21 days of the lockdown, as shown by Acuité Ratings.
Barclays said the cost of the underlying 21 days of conclusion similarly as the
previous two more restricted ones will amount to 8.5 lakh crore (US$120 billion).
Confederation of Indian Industry (CII) had searched for a budgetary money related
update heap of 1% of India's GDP amounting to 2 lakh crore (US$28 billion). The
financial pack and financial plans approach is being diverged from what has happened
in various countries, for instance, Germany, Brazil and Japan. Jefferies Group said
that the public authority can consume 1.3 lakh crore (US$18 billion) to fight the
impact of coronavirus. Bloomberg's market investigators state in any occasion 2.15
lakh crore (US$30 billion) ought to be spent. Former CEA Arvind Subramanian said
that India would require a 10 trillion (US$140 billion) improvement to overcome the
contraction.

The recovery data-

First up, in the wake of contracting for a half year on the jog, India's fares arranged a
turnaround and filled in September. The movement of development was peripheral at
5.27% however in light of the current situation, any development is a sprightly turn of
events. In any case, imports declined by near 20% and that is normally terrible
information for a developing economy. As this graph underneath fair and square of
exchange standardization shows, sends out have gotten back to 98.4% of typical in
September, while imports have ascended at a more slow movement to 73.7% of
ordinary.

At that point there was idealistic information from the urgent car area. Maruti Suzuki
enlisted a 34% hop in deals in September — selling the most number of vehicles in a
month in the previous two years. It was not by any means the only organization to
improve. Hyundai (24%), Honda (10%) and Mahindra and Mahindra (3.5%) — all
observed positive development despite the fact that whatever as Toyota (less 20%)
passed up a major opportunity. Bikes, driven by Hero MotoCorp, additionally
observed wellbeing deals.

The expectations of powerful deals during the impending happy season is the
conceivable driver for these buys as vendors stock up. Given the state of the economy,
it is not really amazing that the focal point of such deals is at the lower end of traveler
vehicles and furthermore in country regions.

A partnered improvement was in the interest for petroleum, which developed by 2%

over September a year ago, and rose unexpectedly since the cross country lockdown
was reported in later March. Utilization of diesel, notwithstanding, enlisted a fall
year-on-year (that is, in September this year contrasted with September 2019). There
is by all accounts more interest for individual portability and less for network
versatility, and this is appearing both in the interest for the kind of fuel and the sort of
vehicles. For example, fly fuel deals in September were down 54%, year-on-year.

The data looks decent for a robust economy like India’s and prospects of the annual
year 2021 being prosperous for the country looks probable. A major concern or factor
for this to hold water will be the avoidance of rise in cases and the marketplace to
work seamlessly without any further breaks or halts. The IT sector has been the most
robust of them all to have adapted to the situation well. Two major reason are cited
for the same. First, the ability to have the infrastructure to work from home through
laptops and more importantly, second, the literate workforce it consists. With
agriculture not being affected at the production level, and even the supply chain being
unaltered, it stood ground better than any other sector with such deep intensity of
uneducated workforce. Apart from it, every other unorganized or such sectors faced
issues.

Coronavirus has surprisingly drawn out the auxiliary and repetitive blemishes existing
in numerous economies. India is surely one of them. Till as of late, India was a
worldwide motor of financial development and flourishing. It was close to China on
the boundary of 'pace of development in GDP'. Being the greatest majority rule
nation, which has been conveying the things of destitution, ignorance, fundamental
debasement and casteism. India is additionally an incredible matter of financial
examination for some analysts around the world. Before the Corona started, Indian
economy was battling with developing joblessness, associate free enterprise,
stagnation in the country economy, genuine failure in the financial area and a general
drowsiness in the vast majority of its areas. This battle is fundamentally an aftereffect
of basic defects in this economy, which were not rectified through realistic monetary
changes. The pandemic truly added to the misfortunes of Indian individuals,
particularly poor people. This paper endeavors to immediately introduce the effect of
COVID-19 on Indian economy in the foundation of a similar effect on worldwide
economy. The paper presents different solutions for face COVID-19 as well as
eliminate a portion of the basic defects. It is a modest solicitation on my part that the
perusers ought to evaluate the current Indian condition, remembering that this nation
is battling on two fronts at the same time viz. her old inheritances and the most recent
pandemic.