Dr Vishal Gupta
There are some episodes like coronavirus pandemic, which stay imprinted in one’s reminiscence for a life span, for its impact is not restricted to a particular topography and neither is it limited to a particular portion of society, but covers approximately each facet of human beings life. India reported the first confirmed case of the coronavirus infection on 30 January 2020 in the state of Kerala. Since then, COVID-19 cases in India have crossed one lakh with death toll of more than 3000. In view of the fact that vaccine is yet to be found, lockdown remained the lone method to slow its spread. Nevertheless, the lockdowns are also pushing one of the fastest developing economy i.e. India to the verge. The economic impact of the coronavirus pandemic in India has been basically disturbing. For any money-making activity there has to be a supply side and a related demand side and lack of either of the side obstructs the activity. During the different versions of lockdown in India, there has been a significant fall in the supply side of the economic chain because of community staying at home.
The productivity as well as supply has been reduced due to the lack of labour inputs owing to social distancing and lockdown, like there are no human resources working in the industries, no cultivators cultivating their land and no transporters to take goods from their manufacturing points (factories) to final consumers. In spite of the problem of lack of transporters, the government of India is trying its best to keep the production of essential commodities and its supply chain intact. With the decline in supply side, the sluggish demand side has also started to slow down the Indian economy. Generally, demand in any financial system is determined primarily by private final consumption, private investments and government expenditure. According to the Economic Survey 2020, private final consumption contributed to around 60 percent of India’s GDP. But the lockdowns have also diminished the private consumption, because the natives have cut back their consumption to their basic essential needs and forgoing their discretionary expenses. The private investments too have observed a slowdown chiefly because of lower credit flow. Government expenditure, though, is projected to provide some relief and add to the GDP growth. One more major concern for the Indian economy is its massive informal sector which accounts for approximately 94 per cent of the total employment and about 45 per cent of the production in the country. Additionally, this informal sector provides work for the most impacted people because of the lockdown viz. contract workers or daily wage earners and migrant labourers. Considering this, India had rolled out a Rs.1.7 trillion relief package under PM Garib Kalyan Yojana, comprising about 1% of GDP to help the poor and daily wage earners to sustain during these hard times.
The coronavirus outbreak has impacted both Indian financial institutions and consumer sentiments with the ongoing liquidity and credit concerns. To help the lenders, the Reserve Bank of India (RBI) has initiated some measures to force more rupee liquidity into the banking system through its ‘Long Term Repo Operations’ and reduction of 25 basis point in its reverse repo rate.
The World Bank and credit rating agencies have reduced India’s growth for fiscal year 2021 with the lowest figures, India has glimpsed in three decades since India’s economic liberalization in the 1990s. The International Monetary Fund (IMF) has estimated a gross domestic product (GDP) growth of 1.9 per cent for India in FY 2020-21. In order to encounter all these economic tribulations, the Prime Minister Modi came up with a gigantic Rs.20 lakh crore stimulus package to revive the economy hit by COVID-19. So, if this historic economic support (10% of GDP) from the central government and upcoming hot and humid months control this evil virus, what we need to do is to rekindle optimism and rebuild India.
Dr Vishal Gupta