Year of 2020 had been an omen for the entire world and India is no exception to dodge from this curse. Unemployment rose from 6.7% on 15 March to 26% on 19 April and then back down to pre-lockdown levels by mid-June. During the lockdown, an estimated 14 crore (140 million) people lost employment while salaries were cut for many others. More than 45% of households across the nation have reported an income drop as compared to the previous year. The Indian economy was expected to lose over ₹32,000 crore (US$4.5 billion) every day during the first 21-days of complete lockdown, which was declared following the corona virus outbreak. Under complete lockdown, less than a quarter of India’s $2.8 trillion economic movement was functional. Up to 53% of businesses in the country were projected to be significantly affected. Supply chains have been put under stress with the lockdown restrictions in place; initially, there was a lack of clarity in streamlining what an “essential” is and what is not. Those in the informal sectors and daily wage groups have been at the most risk. A large number of farmers around the country who grow perishables also faced uncertainty.
The Government of India announced a variety of measures to tackle the situation, from food security and extra funds for healthcare and for the states, to sector related incentives and tax deadline extensions. On 26 March a number of economic relief measures for the poor were announced totalling over ₹170,000 Cr. The next day the Reserve Bank of India also announced a number of measures which would make available ₹374,000 Cr. to the country’s financial system. The World Bank and Asian Development Bank approved support to India to tackle the coronavirus pandemic.
Businesses across the world namely hospitality, entertainment, aviation etc have seen a major negative impact. Various sports events such as IPL and Olympics have been postponed. Schools and colleges have been closed. The virus has also disrupted the functioning of various online giants such as Amazon. Countries such as USA, Italy and Spain are suffering the most since their death toll is very high. Factories, Restaurants, Pubs, Markets, Flights, Super Markets, Malls, Universities and Colleges etc. were shut down. Fear of corona virus has limited the movement of the individuals. People were not even going to buy the daily essentials and these all were somewhere impacting the economy of the world as a whole. The Organization for Economic Co-operation and Development (OECD)reveals that they have 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 a huge decline in government revenues and growth of the income for at least two quarters as the coronavirus hits economic activity of the country as a whole. 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 the biggest component of GDP. India’s total electronic imports is equal to 45% that of China. Around 1/3rd of machinery and almost 2/5th of organic chemicals that India purchases come from China. For automotive parts and fertilisers China’s share in India’s import is more than 25%. Around 65 to 70% of active pharmaceutical ingredients and around 90% of certain mobile phones come from China to India.
On the upside, better news on vaccines and treatments, and additional policy support can lead to a quicker resumption of economic activity. On the downside, further waves of infections can reverse increased mobility and spending, and rapidly tighten financial conditions, triggering debt distress. The Geopolitical and trade tensions could damage fragile global relationships at a time when trade is projected to collapse by around 12 per cent.