The coronavirus pandemic is creating a serious impact on the global economy, an economic recession may happen across the world in 2020.
A report by the UN Conference on Trade and Development has forecast that the global economy may see an impact of $1-2 trillion in 2020. The Economic Times in its report stated that its potential impact on the Indian economy is not yet known. Former RBI governor Raghuram Rajan also said, “We cannot be sure of the full impact of coronavirus on Indian economy at the moment.” But the several sectors are already feeling the pain. The indications are clearly seen in the fall of Sensex & Nifty points as Indian stocks suffer worst days in recent history.
India’s growth rate was under pressure even before the threat of outbreak arrived. Once one of the fastest-growing economies in the world, its growth slowed to 4.7% last year – the slowest in six years. GDP growth for the current quarter, estimated at 4.3%, is seen dropping to sub 4% levels in the coming three-month period. According to CII, GDP could fall below 5% in FY 2021 if policy action is not taken urgently.
As LiveMint reports, The Federation of Indian Chambers of Commerce and Industry (FICCI) said: “There was a strong hope of (economic recovery) in the last quarter of the current fiscal. However, the coronavirus epidemic has made the recovery extremely difficult in the near to medium term.”
As FICCI showed in its survey, 53% of Indian businesses have indicated a marked impact of COVID-19 on business operations.
On the other hand, a report by Business Standard’s says that unemployment was at a 45-year high last year. The industrial output from the eight-core sectors at the end of last year fell by 5.2% – the worst in 14 years. Small businesses had only just begun to recover from the controversial 2016 currency ban. Now, experts say the coronavirus outbreak is likely to further cripple the already frail economy.
India has a large informal industrial sector, some experts have estimated that India’s informal sectors account for roughly 94% of total employment in the country and contribute about 45% of output. The lockdown has turned all the workers to unemployed within a day. In a goodwill note, the finance minister of India, Nirmala Sitaraman said that no one will stay in hungry during this crisis. Krishnamurthy Subramanian, chief economic advisor to the Indian government added that India is working on a set of policy measures to combat the economic impact of the coronavirus and that may include some cash transfers to workers in the informal sector.
As per reports, India’s agriculture industry contributes nearly $265bn to GDP. The lockdown is causing major trouble to the farmers and making them even more vulnerable.
However, the government says it will give farmers 2,000 rupees ($30) in April as an advance payment from an $80 annual pay-out to tide over the situation. If supply chains don’t work properly, a lot of food will be wasted and lead to massive losses for Indian farmers.
The lockdown also affects the Indian aviation industry. Since India has suspended domestic and international flights until mid-April, the shutdown is also bound to push India’s fast-growing aviation industry into peril. This crisis is occurring at a time when airline companies are facing troubles for the falling value of the Rupee against the Dollar. The Centre for Asia Pacific Aviation (CAPA) has assessed that the Indian aviation industry will suffer losses worth nearly $4bn this year.
The nationwide lockdown is also affecting the hospitality and tourism industries. The govt of India has suspended all visas for at least a month. Domestic tourism has also been suspended. Therefore, hotels and restaurant chains across the country are empty and are likely to remain so for several months, sparking worries of large-scale layoffs. It is estimated that the loss to the tourism industry will be 15,000 crore (US$2.1 billion) for March and April alone.
As per the Anarock Property Consultants predictions, India will face an annual decline of 25-35% in home sales (top seven cities) in 2020 due to the Covid19 outbreaks.
The automobile industry, a key indicator of a country’s economic growth, which has been in trouble for a long time is seeing its worst hits of downsizing. Experts are estimating losses of nearly $2bn. Similarly, the e-commerce sector has also been badly affected.
So, the question we need to ask – Is India’s relief package enough? Experts say that India needs a larger stimulus package soon to help businesses face this extraordinary crisis. Therefore, the Indian industry is seeking relief measures to aid the economy.