Economic impact of the COVID-19 pandemic in India
The economic impact of the 2019–20 coronavirus pandemic in India has been largely disruptive. The World Bank and credit rating agencies have downgraded India's growth for fiscal year 2021 with the lowest figures India has seen in three decades since India's economic liberalization in the 1990s. The former Chief Economic Advisor to the Government of India has said that India should prepare for a negative growth rate in FY21. However, the International Monetary Fund projection for India for the Financial Year 2021-22 of 1.9% GDP growth is the highest among G-20 nations. Within a month, unemployment rose from 6.7% on 15 March to 26% on 19 April.During the lockdown, an estimated 14 crore (140 million) people have lost employment.More than 45% of households across the nation have reported an income drop as compared to the previous year.
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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 coronavirus 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 are the most at risk. A large number of farmers around the country who grow perishables are also facing uncertainty.Various businesses such as hotels and airlines, are cutting salaries and laying off employees.
Major companies in India such as Larsen & Toubro, Bharat Forge, UltraTech Cement, Grasim Industries, Aditya Birla Group,BHEL and Tata Motors have temporarily suspended or significantly reduced operations. Young startups have been impacted as funding has fallen. Fast-moving consumer goods companies in the country have significantly reduced operations and are focusing on essentials. Some defense deals have been affected/delayed due to the pandemic, such as the delivery of Dassault Rafale fighter jets.
Stock markets in India posted their worst loses in history on 23 March 2020. However, on 25 March, one day after a complete 21-day lockdown was announced by the Prime Minister, SENSEX and NIFTY posted their biggest gains in 11 years, adding a value of ₹4.7 lakh crore (US$66 billion) crore to investor wealth
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The Government of India has announced a variety of measures to tackle the situation, from food security and extra funds for healthcare, to sector related incentives and tax deadline extensions. On 26 March a number of economic relief measures for the poor were announced totaling over ₹170,000 crore (US$24 billion). The next day the Reserve Bank of India also announced a number of measures which would make available ₹374,000 crore (US$52 billion) to the country's financial system. On 29 March the government allowed the movement of all essential as well as non-essential goods during the lockdown. On 3 April the central government released more funds to the states for tackling the coronavirus totaling to ₹28,379 crore (US$4.0 billion). The World Bank and Asian Development Bank have approved support to India to tackle the coronavirus.
On 14 April 2020, the Prime Minister of India extended the lockdown to 3 May. A new set of guidelines for the calibrated opening of the economy and relaxation of the lockdown were also set in place which would take effect from 20 April. On 17 April, the RBI Governor announced more measures to counter the economic impact of the pandemic including ₹50,000 crore (US$7.0 billion) special finance to NABARD, SIDBI, and NHB.On 18 April, to protect Indian companies during the pandemic, the government changed India's foreign direct investment policy. The Department of Military Affairs has put on hold all capital acquisitions for the beginning of the financial year. The Chief of Defence Staff has announced that India should minimize costly defense imports and give a chance to domestic production; also making sure not to "misrepresent operational requirements". On 12 May the Prime Minister announced an overall economic package worth ₹20 lakh crore (US$280 billion),10% of India's GDP, with emphasis on India as a self-reliant nation. During the next five days the Finance Minister announced the details of the economic package.
ECONOMIC SITUATION
In India up to 53% of businesses have specified a certain amount of impact of shutdowns caused due to COVID-19 on operations. Various business such as hotels and airlines are cutting salaries and laying off employees.By 24 April the Unemployment Rate had increased nearly 19% within a month, reaching 26% unemployment across India, according to the "Centre for Monitoring Indian Economy".Around 140,000,000 (14 crores) Indian lost employment in the lockdown. More than 45% households across the nation have reported an income drop as compared to the previous year.
Live events industry has seen an estimated loss of ₹3,000 crore (US$420 million). A number of young startups have been impacted as funding has fallen. A DataLabs report shows a 45% decrease in the total growth-stage funding.
On 4 April, former Reserve Bank of India chief Raghuram Rajan said that the coronavirus pandemic in India may just be the "greatest emergency since Independence". The former Chief Economic Advisor to the Government of India has said that India should prepare for a negative growth rate in FY21 and that India would need a ₹720 lakh crore (US$10 trillion) stimulus to overcome the contraction.
Numerous companies are carrying out measures within their companies to ensure that staff anxiety is kept at a minimum. Hero MotoCorp has been conducting video townhall meetings, Tata Group has set up a task force to make working from home more effective and the task force at Siemens also reports on the worldwide situation of the COVID-19 pandemic.
ESTIMATED ECONOMIC LOSSES
The Indian economy is expected to lose over ₹32,000 crore (US$4.5 billion) every day during the first 21 days of the lockdown, according to Acuité Ratings, a RBI approved credit rating agency. Barclays said the cost of the first 21 days of shutdown as well as the previous two shorter ones will be total to around ₹8.5 lakh crore (US$120 billion).
On 27 March, Moody's Investors Service downgraded its estimate of India's GDP growth for 2020 from 5.3% to 2.5%. Fitch Ratings revised its estimate for India's growth to 2%. India Ratings & Research also downgraded the FY21 estimate to 3.6%. On 12 April 2020, a World Bank report focusing on South Asia said that India's economy is expected to grow 1.5% to 2.8% for FY21. This will be the lowest growth for India in 30 years.The World Bank report said that the pandemic has "magnified pre-existing risks to India's economic outlook".Confederation of Indian Industry have estimated that India's GDP for FY21 will be between 0.9% and 1.5%. On 28 April the former Chief Economic Advisor to the Government of India has said that India should prepare for a negative growth rate in FY21.
Confederation of Indian Industry has sought an economic fiscal stimulus package of 1% of India's GDP amounting to ₹2 lakh crore (US$28 billion). The fiscal package and fiscal policies approach is being compared to what has happened in other countries such as Germany, Brazil and Japan. Jefferies Group said that the government can spend ₹1.3 lakh crore (US$18 billion) to fight the impact of coronavirus. Bloomberg's economists say at least ₹2.15 lakh crore (US$30 billion) needs to be spent. Former CEA Arvind Subramanian said that India would need a ₹10 trillion (US$140 billion) stimulus.
It is estimated that the loss to the tourism industry will be ₹15,000 crore (US$2.1 billion) for March and April alone. CII, ASSOCHAM and FAITH estimate that a huge chunk of the workforce involved with tourism in the country faces unemployment.
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@rishabh99946 20 lac Cr is a huge amount of money to recover the economy , let see were we are going to in next 2 years.
Yes @adityajainxds Indian economy were already down now because of lockdown it's just got worse :(
This getting serious, 6months serious crisis has dug deep to affect the economy in 2years to come. Their can be a solid strategy to help the economy yet, it will still remain flexible, untill they are sure of how far the pandemic will last. I hope every thing gets better soon
Currently i don't have any idea how long this lockdown will last... So plans to improve economy can't worked for now... I just hope everything get back to normal everywhere.
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