With the onset of Coronavirus (COVID-19) in India, businesses have been shut, PVRs are empty, schools & colleges are now online, malls are closed, streets deserted and there is a looming economic crisis everywhere. An unprecedented, enormous and perhaps the worst Recession India has ever seen awaits all of us.
According to the latest data by the United Nation, at 138 crore, Indian population accounts for 17.7% of total world population. With more than half of the population belonging to lower class and middle class, the virus couldn’t have come at a worse time. From demonetization, NBFC credit crisis and GST, the people of India have lived many nightmares. Soaring unemployment rates, job draught and muted wages have dented and sharply penetrated the lower and middle class’s dreams and hopes. Again, this never seen before Pandemic is crushing Indians’ in every possible way. People are afraid more than ever. Stress and anxiety have taken a toll and is adversely impacting the mental health of people.
COVID-19 is affecting all Indian industries like never before. However, the impact differs, companies in FMCG, Pharmaceuticals are less affected than Airlines, Automobiles and other sectors. Major companies in India such as Larsen & Toubro, Bharat Forge, UltraTech Cement, Grasim Industries, Aditya Birla Group, BHEL and Tata Motors have temporarily suspended or significantly reduced operations. There is a threat for startups as well due to decreased funding.
With the situation getting out of hand, the burden primarily falls on India’s lower and middle class. While the rich can bear this situation, it has to be kept in mind that around 80 percent of India lives life on the edge, surviving from paycheck to paycheck or the labour class even earning on a daily basis. With the temporary and/ or permanent shut down of factories and offices, there is but nowhere that Indians can go.
During the lockdown, an estimated 14 crore (140 million) people lost employment while salaries were cut for many others. More than forty five percent of households across the nation have reported an income drop as compared to the previous year. The Indian economy expected to lose over ₹32,000 crore (US$4.5 billion) every day during the first 21-days of complete lockdown, which was declared following the coronavirus outbreak.
Covid-19 has proved that neither India nor Indians were prepared for a calamity. With no income and constant spending, there is absolutely no way that the people of India can continue to bear the pandemic and its effects. People are more afraid of the aftermath than the virus.
On 26 May, CRISIL (Credit Rating Information Services of India Limited) published a report named ‘Minus Five, India GDP growth outlook for fiscal 2021’ where they predicted India’s GDP growth to contract 5% in fiscal 2021 because of Covid-19.[2] According to the world bank, the current pandemic has ‘magnified pre-existing risks to India's economic outlook’. On 8th June, 2020, World Bank revised India’s growth again and has stated ‘In India, growth is estimated to have slowed to 4.2 per cent in the fiscal year 2019/20 (the year ending in March-2020) and output is projected to contract by 3.2 per cent in fiscal year 2020/21, when the impact of COVID-19 will largely materialise. Other international rating agencies such as Moody’s Investors Service, Fitch Rating and S&P Global Ratings have all predicted a 4-5 percent contraction in India’s economic growth rate during April 2020 to March 2021 fiscal.
The World Bank also downgraded India’s projection by a huge negative 9%, in Global Economic Prospects latest edition. The current picture projects a huge recession for India, probably the worst India has ever seen. With the initial lockdown only, many jobs were lost and 5 months into the spread of Covid-19 in India, the tally of patients as well as the number of deaths has increased. Thousands of jobs have been lost and people are looking for ways to sustain their family.
Government’s aids
The Government of India has announced various measures and relief package to tackle this new age pandemic. On March 24, 2020, the finance minister announced various measure in response to Covid-19. The package covers sectors like food, healthcare, social security, economic stimulus, relief for MSME, NBFCs amongst others. In order to prevent opportunistic takeover/ acquisitions of Indian companies, the government on 18 April changed India’s Foreign Direct Investment (FDI) policy which now requires prior clearance for investments from countries with which India shares border. While the new FDI policy does not restrict markets, the policy ensures that all FDI will now be under scrutiny of the Ministry of Commerce and Industry. On May 17, the hon’ble Prime Minister Shri Narendra Modi announced a special economic and comprehensive package of Rs 20 lakh crore which is equivalent to 10% of India’s GDP. The main focus of the package lied on making India ‘Aatm Nirbhar’ or Self-Reliant. The five pillars of becoming Aatm Nirbhar were highlighted. These include Economy, Infrastructure, System, Vibrant Demography and Demand.
Conclusion
With improved reforms and steps taken by the government to increase foreign investment, India has attracted foreign investments of over USD 20 billion during the coronavirus time, which is an increase of 20% from the year before that. With increased foreign investment, changing business environment of India and government reforms to save the economy, jobs would be created and there is still a light of ray. Nevertheless, the middle and lower class is still suffering, from defaulting on loans, reduction in salary, permanent layoffs, and lost means to sustain livelihood, a lot has to be done in order to get India back on its feet. However, the government must take care that this should not come at a cost of cheap labour and misery of lower class!
