CORONA-VIRUS : Impact on Indian Economy

Coronavirus outbreak was first reported in Wuhan, China on 31 December, 2019. Before reading in detail about the impact, first, let us study about coronavirus.

Coronavirus (CoV) is a large family of viruses that causes illness. It ranges from the common cold to more severe diseases like Middle East Respiratory Syndrome (MERS-CoV) and Severe Acute Respiratory Syndrome (SARS-CoV). The novel coronavirus is a new strain of Virus that has not been identified in human so far.

WHO is working closely with global experts, governments, and other health organisations to provide advice to the countries about precautionary and preventive measures.

There are three major channels of impact for Indian businesses according to the report namely linkages, supply chain and macroeconomic factors. The data of the Dun & Bradstreet shows that at least 6,606 Indian entities have legal linkages with companies in countries with a large number of confirmed COVID-19 cases. And business activity in the foreign markets is slow which implies a negative impact on the topline of these companies. Sectors that would be much affected includes logistics, auto, tourism, metals, drugs, pharmaceuticals, electronic goods, MSMEs and retail among others

Further, according to the World Bank's assessment, India is expected to grow 1.5 per cent to 2.8 per cent. And IMF projected a GDP growth of 1.9 per cent for India in 2020 because the global economy is affected by the COVID pandemic, the worst recession since the Great Depression in the 1930s. Also, we can't ignore that the lockdown and pandemic hit several sectors including MSME, hospitality, civil aviation, agriculture and allied sector.

Reduction in the urban transaction can lead to a steep fall in the consumption of non-essential goods. It can be severe if disruption causes by the 40-day lockdown (may extend) and affect the availability of essential commodities.

Due to weak domestic consumption and consumer sentiment, there can be a delay in investment which further add pressure on the growth.
We can't ignore that post-COVID-19, some economies are expected to adopt de-risking strategies and shift their manufacturing bases from China. This can create opportunities for India.

India is fighting with COVID-19 wonderfully, but the question for now is how India will fight against 

As India contemplates an exit strategy from the nationwide lockdown, Swiss bank UBS on Wednesday projected the country’s economy to contract 3.1% if mobility restrictions largely stay in place until end-June and economic activity returns to normal by end-August.

However, for the base case scenario, assuming current mobility restrictions are lifted by mid-May, and economic activity is largely back to normal by end-June, it projected growth to shrink to -0.4% in FY21, moving its earlier estimate of 2.5% down to negative growth territory.

“The challenges for India vs its peers are starker if infections spread rapidly considering India’s higher population density per capita, weaker health infrastructure and limited resources for intensive testing," UBS said in India Economic Perspectives report.

Under a third scenario of the coronavirus continuing to spread, possibly in waves, all the way through to mid-2021, UBS said the economy could shrink to as low as -4.2% in FY21. “Any rise in cases post lifting of restrictions would lead to restrictions being imposed again. That said, we assume restrictions would be more selective in areas where the infected cases are higher vs a one-size-fits-all approach on a pan-India basis," it added.

India has recently announced some relaxation in its lockdown, permitting the resumption of agriculture and limited manufacturing mostly in rural areas.

Well for now we only can say that India will fight with Economy Slowdown as well it fighting with COVID-19. India is fastest growing/Developing Country in the world, So it will possible to stand again after this pandemic.