IMPACT OF COVID-19 PANDEMIC ON INDIAN

ECONOMY

INTRODUCTION-
The covid-19 virus which initially started in China and later world health organization (WHO)
Announced covid-19 as global health crisis in the month of march 2020 (2nd week). The
WHO reached to this decision since the positive cases were/are rapidly showing the
upswinging trends towards 20 lacs with death toll crossed over to 1 lakh plus. The entire
world was suffering miserably without having any vaccine to embark upon the virus to
contain immediately. As a only effective tool available to weaken this virus spread, the
countries are helplessly exercising lockdown. This affect the health of Indian economy as
Indian economy was in its worst phase even before the coronavirus outbreak. 2020 year is
also considered as the slowest growth in at eight year. It felt that this will bring the biggest
slowdown of 100 years in the world. India as a fast developing country faced an extremely
severe effect of this natural phenomenon. This lockdown phase further has its long-term
impact on the Indian economy and various steps taken by the government and Reserve
Bank of Indian (RBI). As of September 16, 2020 we are in the unlock stage now, this unlock
was done to repair our economy on the other hand India was standing second in the world
for the number of covid-19 cases. To prevent outburst of coronavirus it is important to
maintain safe distance from one another, wearing mask in public places is very essential.
COVID-19 is not only one pandemic that the world is fighting there have been many
diseases earlier we’ll go through some of the pandemics such as 1918 Spanish Flu,
19611975 Cholera, 1981 HIV, 2009-2010 HINI Swine flu.

The first case of corona was detected on 30th January 2020 in Thrissur district of Kerala. The
first positive person was a student at Wuhan University, China who had come home for a
vacation. India was having second highest cases after United Stated of America. India is the
first country worldwide to have hit around 80,000 new cases of COVID in a single day. Below
chart shows the growth in the Covid cases in India from February 2020 to September 2020.
SUMMARY-
There were positive and negative impact of Covid-19 on Indian economy. Positive impacts
were such as-

1.Drop in pollution level:

As there has been significant Global decrease in the air pollution levels. Experts believe that
drop in air pollution level maybe saving significant amount of lives globally. In Mumbai and
Delhi there was huge difference of NO2 as we compare from 2019 in month from March 25
to May 2 2020. As our PM Modi imposed Janata curfew on March 22 nd 2020 by which there
was significant drop in air pollution level in almost all cities of India. The average air quality
index of Delhi, Kolkata and Bengaluru was within 2 digits. On 23rd April 2020 the residents of
Jalandhar a city in Punjab could see the Dhauladhar mountain ranges situated 213 km away.

2. Drop in crime rates:

Cities such as Delhi, Bengaluru, Lucknow and Kolkata have reported 60-90% drop in crimes
as compared to previous years. The decrease in crime is due to the less people on the roads.
This is also the case with other cities in India but there has been a sharp increase in
domestic violence.

3. Road accidents:

Due to the lockdown there has been reduction in the road accidents and casualties. The dip
in number of accidents is due to suspension of public transport and general mobility. During
the first two phases of lockdown, as many as 140 people died due to the Road Crashes
across the country out of which over 30% were migrants travelling back home.

4. Pharmaceutical industry-

India which was not manufacturing even a single PPE kit before the pandemic is now
producing 2.06 kit daily. The government has identified 110 domestic manufactures of
which only 52 companies are manufacturing PPE kits right now. India has become top
exporter of PPE kits in just 2-months.

Stimulus package announced by government-

Finance minister announced rupees 1.7 lakh crore stimulus which includes food grains and
cooking gas to poor for 3 months. According to the stimulus-

a. 80 crore poor ration card holders will get 5 kgs of wheat or rice and 1 kg pulses free
of cost every month for next 3 month.

b. 20.4 crore women having Jan Dhan bank account will get cash help of Rs.1,500 over
3 months i.e. rupees 500 per month.
c. 8.3 crore women will get LPG refills for next 3 months absolutely free.
d. Widows and disable will get ex-gratia cash rupees 1000.

The Reserve Bank of India has launched various programmes to help borrowers and
boost liquidity, beside cutting interest rates to a record low. Some features of the
package announced by the government of India are as follow-

1. Salaried workers and taxpayers were provided relief in form of extended deadline
for IT returns the new due date was November 30 2020.
2. The rate of TDS and TCS have been cut by 25% for next year.
3. Statutory provident fund payments have been reduced from 12% to 10% for the
next 3 months.
4. MSME were given Rs. 3 lakh crore providing relief to 45 lakh units with access to
working capital to resume business activites.
5. Rs 90,000 crore liquidity injection to power distribution companies facing
unprecedented cash flow crisis.
6. Rs 45,000 crore partial credit guarantee for non-banking financial companies.

The detail of the stimulus package of 20 lakh crores provided by the government has
been announced. The tables provide a detail with respect to the item and the
amount of package allocated. stimulus provided by annoucement in part-
1

Stimulus provide by announcement in part-2

Stimulus provide by announcement in part-3

 Stimulus provided by announcement in part-4 and part-5

As we have seen the positive impact of covid-19 on Indian economy. Now, we will
have a look on much influenced by the various monetary and fiscal activities as it
follows macro and micro-influence.
1. Overall macro impact:
There was unprecedented collapse in demand, there will also be widespread
supply chain disruptions due to the unavailability of raw-material, exodus of
millions of migrant workers from urban areas, slowing global trade and shipment
and travel-related restrictions imposed by nearly all affected countries. The
Centre for Asia Pacific Aviation (CAPA) has assessed that the Indian aviation
industry will post staggering losses worth nearly $4bn this year. As Indian’s
aviation, tourism and hospitality industries had already sustained maximum
damage because of the COVID-19 outbreak, after the lockdown it is questionable
to what extent they will be able to ride out this storm.
As the lockdown continues, electricity demand remains almost 30% below last
year’s levels Cargo traffic at Indian ports was down by around 5% year on year in
March.
Rail freight which is an essential indicator of economic activity has been down by
36% year over the last seven days.
When the lockdown is relaxed. Their businesses will suffer for several months,
sparking worries of large-scale layoffs. The World Travel and Tourism Council has
projected that travel could fall by 25% in 2020, putting to risk 12-14% of the jobs
in the sectors. That translates into 50 million jobs at risk, globally.
2. Agriculture and Rural Activities:
The agriculture sector is critical as a large number of workers and the entire
country’s population are dependent on this sector. The performance of
agriculture is also key to the state of rural demand. In the precovid-19 period,
 agriculture GDP experienced an average growth rate of 3.2% per year in the six
year 2014-15 to 2019-20 with intermittent fluctuation. The second, advanced
estimates of the National Statistical Office (NSO) show that GDP growth in
agriculture has increased from 2.4% in FY19 to 3.7% in FY20. It was also relatively
better at 3.5% in of FY20. However, the terms of trade have moved against
agriculture during 2016-17 to 2018-19 due to bumper crop and horticultural
production, which caused a decline in food prices. This trend continued in
201920. Growth in rural wages was subdued in the pre-COVID-19 period,
particularly for agricultural labour in both nominal and real terms, partly due to
the slowdown in the construction sector. With the outbreak of covid-19, the
situation in rural India is likely to worsen significantly.
The lockdown and associated disruptions will affect agricultural activities and the
necessary supply chains through several channels: input distribution, harvesting,
procurement, transport hurdles, marketing and processing. Restrictions of
movement and labour scarcity may impede farming and food processing.
3. Informal sector:
If we look at the first lockdown announcement many thousands of migrant
workers from several states walking on foot for several hundred to go to their
respective villages. This exodus was triggered by the 21-day lockdown, which
was announced rather abruptly without giving people of the country any time to
prepare for it.
Even after the lockdown is relaxed, it will take some time for the economy to
pick up in the post-COVID19 period and this further aggravate the future
uncertainly for informal workers in general and migrant workers.
Daily wage labourers and other informal workers will be the worst hit during the
lockdown period and will continue to be adversely affected even when the
lockdown is relaxed. With a large chunk of the potential customers of the
informal sector staying at home right now and withdrawing from non-essential
expenditures, the survival of informal sectors unit will become questionable with
every passing day, epically as the health crisis and the associated lockdown drags
on.
As we see informal workers were already facing problems with low wages and
incomes in the pre-COVID19 period. There are significant inequalities between
informal and formal sector workers. With almost no economic activity,
particularly in urban areas, the lockdown has led to large scale losses of jobs and
incomes for these workers.
Out of the total workers, the shares of self-employed, casual and regular workers
respectively were 51.3%,23.3% and 23.4%.
4. MSMEs:
Since most MSMEs primarily operate on cash, they require immediate liquidity
to cope with adverse events.
In this sector, the idea of the government setting up a credit guarantee fund to
encourage banks to lend might work well.
 The micro, small and medium enterprises as a whole from a significant chunk of
manufacturing in India and play an essential role in providing large scale
employment and in the country’s exports.
Their supply chain would be disrupted and they would be affected by the exodus
of migrant workers, restrictions in the availability of raw materials by the
disruption to exports and imports and by the widespread travel bans, closure of
malls, hotels, theatres and educational institutions etc.
Although the pandemic has affected all businesses, the MSME’s sector would be
badly hit by reduced cash flows caused by the nationwide lockdown. The
experience of small and medium businesses during the lockdown in China might
be useful for India. Recent annual reports on MSME’s indicate that the sector
contributes around 30% of India’s GDP and based on conservative estimates,
employs around 50% of industrial workers.
5. Financial markets:
Although the sell-off was witnessed across-the-board, it was more severe for
industries that are hit the hardest by the covid-19 pandemic and the consequent
lockdown, such as tourism and hotel, real estate, asset financing services, banks,
mental industry, automobile and ancillaries, textiles, electricity, mining and food
product companies. As the covid-19 pandemic began spreading across countries
and mainly affected the U.S, growing risk aversion and flight to safety led these
investors to sell large volumes of Indian debt paper, in addition to stocks.
Foreign Institutional investors (FIIs) have been steady investors in Indian debt
over the last few years due to arbitrage between international interest rates and
Indian rates along with a generally stable currency.
In March 2020, panic selling due to the pandemic shaved off 23% market
capitalisation of companies listed on the National Stock Exchange (NSE) within
just a single month. The BSE, Sensex behaved similarly, losing 23% of its value
during March 2020.
However, we are now facing a peculiar situation wherein the mutual funds are
not able to do so because of high-risk aversion on the part of the biggest liquidity
suppliers in the markets - the banks.
With the most extensive liquidity pool away from the secondary markets, mutual
funds are left with no option other than distress selling securities at whatever
price they get to meet the redemptions.

●Analysis of policies announced:

The immediate objective of the policy responses to the economic impact of Covid-19 is to
ameliorate the effect of the shock on economic agents in both the formal and the informal
sectors and to help them tide over the crisis. The central government and RBI have
announced an initial round of fiscal and monetary policies respectively. Besides, several
state governments have also announced fiscal stimulus measures.
● Policy challenges:

National Rural Employment Guarantee Act (MGNREGA) scheme works as an automatic

stabiliser because if people need jobs, they can just apply.

● Migrant workers:

The migrant workers are the worst affected by the lockdown and will continue to be so even
after the lockdown is lifted. One such suggestion is that the government must use the
network of anganwadis, panchayat Bhavan, government schools, government colleges,
railway stations, bus stations, community halls, block offices, district headquarters etc.

● MSME and MFI:

More direct measures of liquidity may be the need of the hour, such as setting up a fund
targeted directly at easing the liquidity constraints of MSMEs.

●Banking sector:

When a bank decides to approve a loan, it performs two functions simultaneously: it is

assuming risk, it is allocating capital. The problem for the banks is that right now they
cannot assess the absolute level of risk, because they do not have any idea how long the
crisis is going to last, or how deep the crisis is going to be. Moreover, this shock has come at
a time when banks have already become risk-averse, given the last few years of balance
sheet problems.

●Food and nutritional security:

The government has nearly 56 million tons of excess stock of grains and cereals compared
to the usual norms. They have declared 5kg free rations in addition to the present
entitlement of buying 5kg at subsidized prices. Otherwise, high prices would hurt the food
and nutrition security of the poor. Government has to make sure that the prices of essential
food items are under control. There is some consensus that at least 10kg free ration per
person per month should be given for three months. The key, therefore, will be to ensure
that the funding is available and in the hands of the states and panchayats, such that when
the appropriate time comes, and many workers sign up for MGNREGA, the mechanism
works as designed.

● Fiscal policy:

Most of the policy actions to support the economy during such extraordinary times will
entail a rise in the fiscal deficit. As discussed in detail in section 5, the government currently
has very little fiscal space to accommodate a substantial stimulus. There is a lot of pressure
from multiple quarters to let go of the fiscal consolidation rules, enlarge the fiscal deficit
and let the debt/GDP ratio go up. It may be unavoidable given the circumstances but should
be done subject to adequate checks and balances so that the long-term consequences of a
fiscal expansion do not jeopardize the economic recovery.

Methodology-
The present Research Paper is using Secondary Data by collecting Information on the
present issue like newspaper, research paper, government reports etc. In line of this, use of
extensive Literature Review method has been implemented to carry out the present
research meaningful. Literature review methodology is a proven tool to do secondary data
base reviews. In this research I have utilized all the information in a tactfully on incredible
precision instead of conducting the same research once again. By which we get a better
understanding of the subject and clear vision for establishment of hypothesis.

Hypothesis

1. Null (H0): There is a significant Relationship between happenings of COVID-19 on

Indian Economy.
2. Alternate (H1): There is no significant Relationship between happenings of COVID-19
on Indian Economy.

RECOMMENDATIONS-
a. All the pending payments to vendors are required to be passed immediately by the
Government Department.
b. There is a urgent need to increase overdraft facilities to state government from the
RBI.
c. Improvisation in Supply Chain network is a must.
d. There is a need to provide income support to low-income families through Direct
Benefits Transfer.
e. GST waivers or tax incentives will provide relief to retailers.
f. Fair and transport pricing of all relevant transport and logistic services through price
caps, etc. policy support and standardisation of hygienic travel.
g. There should be shift towards localization- “Vocal by Local”.
h. There should be proper time announcement to open these shops to ensure
sufficient accessibility of essential goods to consumers.
i. Policies will need to evolve faster than market and policy makers will have to be
more responsive and inclusive.

CONSLUSION-
Coronavirus pandemic is a disaster and these are very uncertain to predict. This has many
consequences such as changing the mindset of people, challenge for the industry and shake
up the world economic order. This is a high time to reset everything as the world order has
become standstill for past few months. We are all allowed to rethink, redesign and
restructure everything. If we involve in doing the right things, we may be able to fix
challenges in new platforms that can face and bear humankind’s environmental damage, it
may be the pollution, self- centered growth or inequality or concentration of economic
power and wealth. Most companies have increases resilience to work from home. While
these many measures were already on the track, they have now going to be new normal
very soon. Risks to supply chains are significant and will have long term impact. Hence it is
important that we improve the capabilities in order to counter the consequences of
unforeseen events. We need quickly restore the profit of business and resume the original
state which was destroyed by the risk. One small virus has devastated the world which is
beyond imaginable for mankind. The important learning we have learnt so far is the
criticality of overall cost control in business and living our livelihood to the minimum.

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