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Estimating is a difficult job. Many analysts are out to estimate what the impact of COVID-19 on the Indian economy will be, and the actual picture will only come out when the dust settles.
(Also read: COVID-19 Myths Are Exacerbating the Pain – Time to Bust Them)
Will we enter a recessionary period?
(Source: <a href=”https://www.freepik.com/free-photos-vectors/business”>Business vector created by starline – www.freepik.com</a>)
From the central bank to private rating agencies, all have predicted a less than expected GDP growth rate in the financial year 2020-21 and have downgraded India’s growth for the fiscal year 2021. This is unprecedented.
What’s really happening?
(Source: <a href=”https://www.freepik.com/free-photos-vectors/background”>Background photo created by mrsiraphol – www.freepik.com</a>)
This is one part where we will not have to estimate.
- Business operations disrupted – Maruti Suzuki, has reported nil sales for April. SpiceJet has announced that pilots will not be paid their April and May salaries. Hotels and restaurants are not accepting guests and the hospitality industry as a whole employs a large chunk of Indians.
- Impact on young startups – China’s significant investments around the world has raised eyebrows of many western countries. Indian authorities, too, were alerted after China’s central bank increased its stake in HDFC amid the pandemic. To check such activities, India brought all investments from neighbouring countries under the approval route rather than the automatic route. This, however, can restrict funds for Indian startups that see Chinese investors as a possible source of funds.
- Job loss – Employees are either staring at job loss or reduction in salaries. This will severely impact consumption as people will have less money to spend, and this is where all problems originate from. Less consumption will mean less production, which will mean lesser jobs, which will mean less spending, and this vicious circle feeds on itself.
- Stock markets in India – Stock market posted worst losses in history on 23 March 2020 (Also read: The 2020 Stock Market Crash). Amid global selloff by investors and tensions raised due to the US blaming China for coronavirus spread, Indian investors too pulled their money out from stock markets. Foreign institutional investors have been net sellers in March, and the future too is uncertain despite the market gaining some points in May.
- Farmers and daily wage earners are fighting for survival – A large number of farmers around the country who grow perishables are facing uncertainty. Although the government has increased support for marketing of produce by bringing more mandis under e-NAM, a pan-India e-trading platform, farmers producing flowers and other perishable crops are suffering due to limited freight movement and low demand. Factories and construction sites are either closed or are operating at scaled-down capacity, thereby leaving many wage earners without any prospect for work.
The Indian government and other agencies are doing their best not to let the economy take a deep plunge.
(Also read: The Coming Together of Two Giants- Jio and Facebook)
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