“HOW COVID-19 IMPACTEDINDIAN ECONOMY?”
Economics is said to be a science of choice. In this Covid-19 pandemic, we have very less choices and it is impacting global and local economy. Let us glance at its impact on global economy.
Impact on Global Economy
According to Economic Times, Global economy could shrink by one percent in 2020 due to COVID-19 pandemic. Several industries have been adversely impacted due to spread of COVID-19 globally. The global impact of China’s slowdown was felt around the world. The virus outbreak has and affected manufacturing, production, demand andsupply. What was previously manufacturing only, recession has now spread to the service sector. Growing economic stress as social distancing causes a sharp decline in demand.
Real GDP Growth Rates
The global economy was already showing uncertainty. Now this risk has been increased to the lock down of many countries. The GDP rates of many countries are decreased by high rate. The GDP rate of U.S. came down to 2.3% from 2.9% this year. Which risks the global recession. On the other hand, in 2018 china’s GDP rate was 6.7% and in 2019 it is 6.1%, while India’s GDP rate was 6.7% in 2018 & in 2019 it came down to 5.3%. which shows a big market shock for India.
Impact on Indian Economy
India’s total electronics import from the China account for 45%. World Bank said the coronavirus outbreak has severely disrupted the Indian economy, magnifying pre-existing risks to its outlook. The coronavirus outbreak has severely disrupted the Indian economy, magnifying pre-existing risks to its outlook. Impact of Covid-19, the World Bank estimated the Indian economy to decelerate to 5 per cent in 2020 and projected a sharp growth deceleration in fiscal 2021 to 2.8 per cent in a baseline scenario. The Covid-19 outbreak came at a time when India’s economy was already slowing, due to persistent financial sector weaknesses, the report said.
Macroeconomic Impact of COVID-19
According to the Conceptual Framework for Identifying Macroeconomic Impact of Disease by World Health Organization Household provides labor and capital to the firms which employs many inputs to produce goods & services. In return of this firms provides rent & wages to the household. Household also provides labor to government to produce public goods. One of the economic functions of households is financing agent for government activities via payment of direct and indirect tax. It also relates to the saving and investments. Covid-19 can challenge the household economic capacity to such an extent that it is forced to resort to loans or debt. Foreign aid also makes direct transactions with the private sector though exports, imports and makes investments in productionthrough Foreign Direct Investment (FDI). All these activities are dependent on each other. Thus, aggregate income derived by these factors should be equal to aggregate expenditures. Otherwise it may lead to further reduction of GDP. Impact on Indian Economy Industry Sectors
Microeconomic Impact of COVID-19
COVID-19 has adversely affected all segments of the country. Considering youth, they are unable to attend schools and colleges. To cope with such situation, efforts are being made by teachers, school administrations, local and national governments. Considering the circumstances, the government has classified different zones according to the intensity of number of patients. These zones are red, orange and green. Comparatively, red zones are facing more problems than others. Daily wage laboreris having more issues as they don’t have other employment or income sources. It is observed that some are shifting their work by finding income sources which are included in necessary services like vegetable selling. To cope up the lockdown many of are adapting digital platforms. Some are carrying their operations on such platforms. Mostly service sector is benefiting with digital platforms. Not only for educational purpose but also for other services like training employees, fitness, dance, singing and so on. these services are being provided using digital tools. According to the current scenario, it can be predicted that from now onward use of technology will go up as compared to earlier.
Chemical Industry
Due to this pandemic, some chemical plants had to stop their operations because there were restrictions on shipping. It was seen that 20% of the production affected due to irregular supply. The demand for chemical industries is reduced and stock prices also fall down.
Automobile Industry
The coronavirus hits the automotive industry at a large extent. Automotive and component manufacturing stopped which affected the sale of vehicles.
Pharmaceuticals Industry
These industries are largely based upon the drug export therefore it has heavy impact.
Textiles Industry
Due to coronavirus outbreak, textile industry has affected. Operations in China have halted that in turn affecting the exports of fabric, yarn and other raw materials from India.
Electronics Industry
The major supplier of raw materials used for making electronics is China. It has disrupted the supply of major electronic brands.
IT Industry
COVID-19 impact in Indian IT can be different from 2008 financial crisis. If a greater number of clients are affected by lockdowns, Indian IT firms would witness another round of price reset. It is a time to positively gear up for future and it is not a time to seat back and relax. We would like to know how you arecoping up!
Authored byDr. Sachin Bhide, Founder & Strategy Designer and Akshata Latthe, Research Assistant at Eha Management Consultancy
https://www.outlookindia.com/newsscroll/manufacturingonly-recession-spreads-to-services-sector-kpmg-report/1784099
https://www.financialexpress.com/economy/coronavirus-outbreak-has-severely-disrupted-indian-economy-world-bank/1925930/
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