IMPACT OF

COVID-19 ON
INDIAN ECONOMY
By- Vaishali Dwivedi
Shreyanshi Shukla
Shruti Ruhela
Vidushi Sharma
Shreya Saxena
Economy of India
The economy of India is a middle income developing 
mixed economy.[51] It is the world's sixth-largest economy
by nominal GDP and the third-largest by 
purchasing power parity (PPP). According to the 
International Monetary Fund (IMF), on a per capita
income basis, India ranked 145th by GDP (nominal) and 
122th by GDP (PPP). From independence in 1947 until
1991, successive governments promoted protectionist
 economic policies, with extensive state intervention and 
economic regulation. This is characterised as dirigism, in
the form of the License Raj. The end of the Cold War and
an acute balance of payments crisis in 1991 led to the
adoption of a broad economic liberalisation in India. Since
the start of the 21st century, annual average GDP growth
has been 6% to 7%, and from 2013 to 2018, India was the
world's fastest growing major economy, surpassing Chand
Historically, India was the 
largest economy in the world for most of the two millennia
 from the 1st until the 19th century.
The long-term growth perspective of the Indian economy remains positive due to its young
population and corresponding low dependency ratio, healthy savings, and investment rates,
increasing globalisation in India and integration into the global economy. The economy slowed in
2017, due to shocks of "demonetisation" in 2016 and the introduction of the Goods and Services
Tax in 2017. Nearly 60% of India's GDP is driven by domestic private consumption. The country
remains the world's sixth-largest consumer mmarket . Apart from private consumption, India's GDP
is also fueled by government spending, investment, and exports. In 2019, India was the world's
ninth-largest importer and the twelfth-largest exporter. India has been a member of the World Trade
Organization since 1 January 1995. It ranks 63rd on the Ease of doing business index and 68th on
the Global Competitiveness Report. With 500 million workers, the Indian labour force was the
world's second-largest as of 2019. India has one of the world's highest number of billionaires and
extreme income inequality .Since India has a vast informal economy, barely 2% of Indians pay
income taxes.
In 2020, India's ten largest trading partners were the United States, China, the United Arab Emirates
(UAE), Saudi Arabia, Switzerland, Germany, Hong Kong, Indonesia, South Korea, and Malaysia.
In 2019–20, the foreign direct investment (FDI) in India was $74.4 billion. The leading sectors for
FDI inflows were the service sector, the computer industry, and the telecom industry. India has free
trade agreements with several nations, including ASEAN, SAFTA, Mercosur, South Korea, Japan,
and several others which are in effect or under negotiating stage.
 How covid-19 has affected GDP ?
India has been hit hard by the pandemic, particularly during the
second wave of the virus in the spring of 2021. The sharp drop
in GDP is the largest in the country’s history, but this may still
underestimate the economic damage experienced by the poorest
households.From April to June 2020, India’s GDP dropped by a
massive 24.4%. According to the latest national income
estimates, in the second quarter of the 2020/21 financial year
(July to September 2020), the economy contracted by a further
7.4%. The recovery in the third and fourth quarters (October
2020 to March 2021) was still weak, with GDP rising 0.5% and
1.6%, respectively. This means that the overall rate of
contraction in India was (in real terms) 7.3% for the whole
2020/21 financial year.In the post-independence period, India's
national income has declined only four times before 2020 – in
1958, 1966, 1973 and 1980 – with the largest drop being in
1980 (5.2%). This means that 2020/21 is the worst year in terms
of economic contraction in the country’s history, and much
worse than the overall contraction in the world (Figure 1).The
decline is solely responsible for reversing the trend in global
inequality, which had been falling but has now started to rise
again after three decades (Deaton, 2021; Ferreira, 2021).
 Impact of Covid-19 on Indian economy
in different sectors
The impact of coronavirus pandemic on India has been
largely disruptive in terms of economic activity as well as a
loss of human lives. Almost all the sectors have been
adversely affected as domestic demand and exports sharply
plummeted with some notable exceptions where high growth
was observed. An attempt is made to analyze the impact and
possible solutions for some key sectors.
■ Food & Agriculture
Since agriculture is the backbone of the country and a part of
the government announced essential category, the impact is
likely to be low on both primary agricultural production and
usage of agro-inputs. Several state governments have
already allowed free movement of fruits, vegetables, milk
etc. Online food grocery platforms are heavily impacted due
to unclear restrictions on movements and stoppage of
logistics vehicles. RBI and Finance Minister announced
measures will help the industry and the employees in the
short term. Insulating the rural food production areas in the
■ Pharmaceuticals
The pharmaceutical industry has been on the rise since the start of the Covid-19
pandemic, especially in India, the largest producer of generic drugs globally. With a
market size of $55 billion during the beginning of 2020, it has been surging in India,
exporting Hydroxychloroquine to the world, esp. to the US, UK, Canada, and the
Middle-East.

■ Oil and Gas

The Indian Oil & Gas industry is quite significant in the global context – it is the third-
largest energy consumer only behind USA and Chine and contributes to 5.2% of the
global oil demand. The complete lockdown across the country slowed down the demand
of transport fuels (accounting for 2/3rd demand in oil & gas sector) as auto & industrial
manufacturing declined and goods & passenger movement (both bulk & personal) fell.
Though the crude prices dipped in this period, the government increased the excise and
special excise duty to make up for the revenue loss, additionally, road cess was raised
too. As a policy recommendation, the government may think of passing on the benefits
of decreased crude prices to end consumers at retail outlets to stimulate demand.
■ Aviation & Tourism
The contribution of the Aviation Sector and Tourism to our GDP stands at about 2.4%
and 9.2% respectively. The Tourism sector served approximately 43 million people in
FY 18-19. Aviation and Tourism were the first industries that were hit significantly by
the pandemic. The common consensus seems to be that COVID will hit these
industries harder than 9/11 and the Financial Crisis of 2008. These two industries
have been dealing with severe cash flow issues since the start of the pandemic and are
staring at a potential 38 million lay-offs, which translates to 70 per cent of the total
workforce. The impact is going to fall on both, White and Blue collar jobs.
■ Telecom
There has been a significant amount of changes in the telecom sector of India even
before the Covid-19 due to brief price wars between the service providers. Most
essential services and sectors have continued to run during the pandemic thanks to
the implementation of the ‘work from home’ due to restrictions. With over 1 billion
connections as of 2019, the telecom sector contributes about 6.5 per cent of GDP and
employs almost 4 million people. Increased broadband usage had a direct impact and
resulted in pressure on the network. Demand has been increased by about 10%.
However, the Telco’s are bracing for a sharp drop in adding new subscribers
Negative impact of covid-19 on Indian
economy
■ The pandemic situation has spread as a global pandemic disease which is creating fear, stress, stigma,
minimising social networks, etc.
■ Health and medical systems, especially biomedical systems, have taken their maximum effort but the
healthcare system itself is affected due to various conditions in nature. Thus, there are many deaths
reported though the biomedical system has made an enormous effort.
■ Some countries such as Italy, Spain, USA and China and a few other European countries are facing a much
higher disintegration in all subsystems of society. Thus, the social system needs a complete reorganisation
and integration to survive.
■ Losing the knowledge, experience, and services of the elderly would mean that the next generation would
not be able to share them for their betterment.
■ Downward trends of family economic conditions and several lower hierarchy social classes facing
unbearable economic hardships due to lack of daily or monthly earnings. Though there are market
accessibility and supply chain network even under the limitation of social mobility, they do not possess the
purchasing power.
■ Disruptions of schools, universities and vocational education segments where they have
to seek certain optional strategies to cover up their educational goals. Especially, they
may face some irreversible gaps in their education. All supply chain networks in the
education field have been interrupted.
■ Decline in religious belief systems and practices in all religions and people may not
believe in superstitious powers, in god and other divine and invisible elements in
society.
■ Global economic recession and increase in poverty level in society. This may lead to
financial crises such as a decline in monetary values, share market values and
businesses, changes in supply chain networks, and purchasing power of the people.
■ There are many people who are losing their jobs and incomes in the formal and informal
sectors in the society.
■ The pandemic situation will directly influence the Sustainable Development Goals
(SDGs) defined to be achieved by 2030, since some countries may not allocate financial
resources to meet the country-specific targets.
Positive impact of Covid -19 on Indian
economy
■ People are adapting to a pandemic situation, and they also understand what the ideal social
behaviour is in a similar situation. This may include government pandemic management
systems and policies.
■ They learnt about social distancing and its rules, conditions and procedures. Especially,
how painful it is but useful within the family and the community. Also, they adapt
themselves to the situation whilst contemplating the difference between a normal situation
and a pandemic situation.
■ Similarly, the government and regional organisations in the global context may reunite to
face the pandemic situation. For example, the SARRC countries reunited over COVID-19
and set up financial allocations for supporting poorer nations. The recent SAARC video
conference on COVID 19 has resulted in the establishment of a fund for regional
cooperation to combat the pandemic. The giant country India contributed USD 10 million
followed by Sri Lanka which contributed USD 5 to the fund. This fund can be utilised for
the improvement of domestic and regional production whilst aiming at an uninterrupted
supply chain in the agricultural, industrial and service sectors.
■ There will be many discoveries and innovations in all affected sectors or spheres at
national, regional and global contexts. Most of these would be medical, environment,
industry and socio-cultural related. These discoveries and innovations will help to
manage the supply chain in South Asian countries.
■ Domestic production could increase due to family or cottage level agricultural practices
including other small-scale handicraft productions in society. This may reduce the
market demand to some extent and it may also cause negative effects amongst
international trades.
■ Decline in defence expenditure at national and global levels and minimising the need or
requirements in the arms race, especially in nuclear weaponry systems, at least on a
temporary basis. Thus, war fear could be minimised in certain regions. This may in turn
influence international terrorism and its supply chain networks.
■ Reduction in the environmental pollution in the world, regional and national contexts.
Mainly, air, sound, and water pollution will be reduced. There are some studies
conducted, and they reveal that the pollution level is reduced drastically in all these
three sectors.
Conclusion
■ When these positive and negative impacts are considered, it is very clear that COVID-19
has caused more positive impacts to the nations, regions and the world, particularly to
South Asian countries. However, some countries such as Italy, Spain, the USA, and China
and several European countries have suffered a lot. At the time of writing this article,
COVID-19 has infected 5,306,928 persons worldwide (when the article was finalised for
publication, the number has increased up to 15,947,291). Comparatively, these positive
and negative impacts are valid for these countries too, irrespectively of the level of the
spread of COVID-19.
■ The proposed future action plan or COVID-19 recovery action plan mainly focuses on
the socio-economic, environment and political spheres and not on the medical and
technical spheres.