India is on the verge of an unprecedented economic as well as humanitarian disaster from COVID-19. India is facing economic pressure due to the coronavirus outbreak. This outbreak has resulted in a steep slowdown in the Indian economy, whereby India’s GDP has reduced by 4.5% as seen by current statistics. With COVID-19 being into the picture the Indian economy is going through a severe slowdown and on top of that multiple such problems hitting the world of work from many such directions. Companies and industries are finding it difficult to sustain in such an environment of the financial crisis. Industries are being urged to take up certain tough decisions like layoff, retrenchment, compulsive leave without pay and many alternative cost-effective methods to sustain the present economic crisis like cutting down the salaries, handing over the pink slip to employees and opting best possible. The sudden outbreak has presented new roadblocks for the Indian workforce and especially for the daily wage and contractual workers.
According to the latest economy forecast by the UN, the probability of countries entering into the recession and companies going bankrupt has increased and India is not likely to “remain decoupled” from the global meltdown. Lockdown across the country is causing significant disruption across multiple sectors including manufacturing, tourism, aviation, real estate, etc are the worst affected. Temporary lockdown resulting in the closing of shopping malls, has affected the Indian economy in a disastrous manner, adversely as a result of which consumption of essential items has reduced which in turn has given a terrible blow to the retail sector.
According to the statistics from the Economic Times of India, live event industries have seen an estimated loss of ₹3000 crores. A number of young startups have been affected as the funding has fallen and there would be a lack of investors in the market. The disruption of the economy is much starker and alarming than the global financial crisis of 2008, which hit the Indian financial sector. Besides that back in 2008 the Indian economy was much better placed to handle the crisis. According to the data in 2019 the GST collection was expected to be approximately 7.4 lakh crore while the government was only able to collect a total of 5.8 lakh crore that is a total loss of 1.6 lakh crore, the government also faced a setback in the income tax sector as the expected revenue to be collected was estimated to 5.2 lakh crore but the government faced a shortfall of 50,000 crores. The above discrepancies have resulted in insufficient funds with the government Clearly the government does not have sufficient funds to provide relief to the people mainly the labor class, contractual workers and the people working on the basis of daily wages.
Other major industries whose figures of losses are alarming are the Hospitality and tourism industry which employs approx. 4 crore people. In the next 10-12 months it expects 12 lakh job losses which may act as a major factor in revenue lo and revenue losses of ₹11,000 crores. The aviation industry is worth ₹2.2 lakh crore, employing 3.5 lakh people, they expect a revenue loss of ₹4,200 crores just between April and June. India’s retail industry is the total worth of ₹59 lakh crore employing around 4.6 crore people, if the pandemic crisis lasts 3 months further it expects 1.1 crore job losses. The restaurant industry employs 73 people, of whom 14%-15% may probably lose their job. The real estate industry is looking at an approximate 35%-40% job loss. Ride-hailing industries meaning Ola and Uber have approximately 5 million driver-partners, the crisis has led to a drop of 40%-50% in the business. These figures would get even more disturbing in the next few weeks as the country heads into total lockdown. Top car manufacturers like Honda, Hyundai have shut down their car productions. Many other such companies have shut down their production until further notice. This would again lead to more lay-offs. The stock market in India has also seen a breakdown since the lockdown
Quarantine and lockdowns have disrupted the chain supply across the whole world. As the trade between the countries has come to a halt, it has affected the global economy as well as the country’s GDP. While some industries in India depend on other countries for their raw material, for example the electronics market, it depends on china majorly for its raw material, has seen a major setback as trade between the two countries trade has been seized.
The outbreak of the virus has placed tremendous responsibility in the hands of the government. The Reserve Bank of India (RBI) along with the government intends to implement below-mentioned measures to deal with the looming economic crisis such as:
- The government under their “Jan Dhan Yojana” has opened 38 crore bank accounts that aim to make affordable access to financial services for the poorest population of India, even a direct transfer ₹5000 can reduce the distress of the poor immediately.
- Interest-free or low-interest bank loans must be provided for medium, small and micro enterprises for the next 4-5 months, which could give an immediate boost for the economy.
- Lowering tax to stimulate demand and place more money in the hands of the people and businesses is vital.
- RBI has provided 3 months moratorium would lessen the financial stress of the public at large
An Economic response task force was announced on 19 March 2020, led by the finance minister of India Nirmala Sitharaman, to tackle the financial crisis. As of announced on March 26, a $ 23 billion dollar package for fighting the economic pandemic has been sanctioned. The spending proposed in the package would amount to about 0.5% of the estimated GDP, while the other countries have a package of about 4%-5% of its GDP.
Everywhere in the world, governments are recognizing that this is no time to worry about fiscal deficits. Instead, they have to do “whatever it takes’’ to come out of this extraordinary crisis. Immediate and necessary actions are indispensable not only from the Indian government but also from every individual to prevent this health pandemic from turning furthermore into an even greater economic disaster.
Blackcoffer Insights 16: - Aymaan Nasir Khan, Nowrosjee Wadia College Pune
