The impact of COVID-19 in pushing the Indian economy to its tail. The decline of India’s GDP has severely affected its industries.
COVID-19 pandemic has become the worst part of the year 2020. The world is facing low growth rate in each of its economies. India is also listed as the hotspot for the COVID-19 pandemic as infection cases have surged in recent months due to the variant. Every industry is affected due to which unemployment rises. We have seen migrant workers with no jobs and layoffs, return to their villages.
Before the COVID-19 pandemic and lockdown in India, the economic growth stood at 4.1% (revised) in the month October – December period of 2019-20. During the initial months of 2020 unemployment rose from 6.7% on 15 march to 26% on 19 April and then back down to pre-lockdown levels by mid-June.
Other countries faced a worse period than India. People lost their lives and there was also a big impact on the pharmaceutical sector. Measured on a per capita basis, India is still far behind other countries in the number of tests. India’s COVID-19 case count rose to 98.57 lakh in December. In India, the government managed the stability of the case count. Due to lockdown the spread of the virus was suppressed and affected fewer regions of the country. Doctors and other hospital staff all over the world have handled a huge responsibility. The Government along with the other organizations came forward, provided help and support to the needy peoples all over the regions in India.
Unparalleled blow to the economy
The Indian economy was expected to lose over Rs. 32000 crores (US$ 4.5 billion) every day during the first 21 days of complete lockdown. Many company workers in the technology and automobile sector lost their positions. As a result, unemployment increased. This is the outcome of that largest GDP contraction ever in Q1 (April – June) FY 2020-2021 at -24%. Under complete lockdown, less than a quarter of India’s $2.8 trillion economic movements were functional. Up to 53% of businesses in the country were shown to be significantly affected. In India GDP growth at 3.1% in Jan-Mar 2020.
For the Indian economy, private consumption and investment are the two biggest engines for growth. Small industries that are responsible for a large number of employees create economic value. Due to lockdown, these small-scale industries faced difficulty in demand and supply of raw material.
Except for agriculture, all the major sectors of the economy were in bad condition. Favourable weather forecast helped agriculture, giving a sign of hope that the rural sector can help support the millions of migrants workers, who returned to their villages from cities when the lockdown begins. The labour-intensive sector like construction, real estate, retail trade, transport, and manufacturing contracted sharply during this quarter. The transportation and automobile industry faced a low growth rate in the economy. The lockdown had a devastating impact on an already slowing economy and people’s livelihoods as shops, eateries, factories, transport, services, and business establishments were shuttered.
Indian GDP growth slips to 4.7% in the December quarter. 7.5% better than what analysts had predicted. This does not mean that the economy is out of the woodwork. As the lockdown opened, the country’s economy comes back on track. India was saved from the worst crisis.
Stress in Banking Sector
Without a doubt, COVID-19 has amplified the existing vulnerability of India’s banking sector, particularly banks and non-bank finance companies (NBFCs). Since April 2020, not only credit growth of banks slowed down, but most importantly, the quality of their assets has also deteriorated sharply. The Reserve Bank of India estimated that under a very severe stressed scenario, the gross non-performing assets of the banking sector could rise to 14.7% by March 2021 from 8.5% in March 2020.
To provide targeted relief to bank borrowers, the K.V. Kamath committee has selected 26 sectors that will require loan restructuring and has listed the financial parameters that will be considered in the restructuring of loans affected by the COVID-19 pandemic. Given investors’ weak interest, public sector banks are unable to provide fresh equity to the capital market. Therefore, the government provided capital support to public sector banks.
During the period of lockdown, work, study, transaction were given an online approach and preference. Students studied online, as the schools and colleges were closed, office workers worked online. The sole reason why online conferencing application companies were successful in this pandemic. As 2021 approaches, the economy of the country has started becoming strong along with the working of all sectors. Industries increasing job opportunity, migrants workers coming back to the cities from the village. Vaccination for the COVID-19 virus is in the final developing stage, and in the meantime, the government spreading awareness and increasing the rate of the test. The Government should commit billions of dollars to better fight the health crisis and to fast-track economic recovery from the COVID-19 induced recession.
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