On 12 January 2020, the World Health Organization (WHO) confirmed that a novel coronavirus was the cause of a respiratory illness in a cluster of people in Wuhan City, Hubei Province, China, which was reported to the WHO on 31 December 2019.
The case fatality ratio for COVID-19 has been much lower than SARS of 2003, but the transmission has been significantly greater, with a significant total death toll.
Indian prime minister Narendra Modi has announced lockdown in the country to fight against the deadly virus. Indian economy is witnessing a huge loss because of COVID 19.
Economic impact
The economic impact of the 2019–20 coronavirus pandemic in India has been hugely disruptive. World Bank and credit rating agencies have downgraded India’s growth for fiscal year 2021 with the lowest figures India has seen in three decades the since economic liberalization in the 1990s. The Indian economy is expected to lose over ₹32,000 crore (US$4.5 billion) every day during the 21-day-lockdown which was declared following the coronavirus outbreak. Up to 53% of businesses in the country will be affected Supply chains have been put under stress with the lockdown restrictions in place; initially there was a lack of clarity in streamlining what is an “essential” and what isn’t. Those in informal sectors and daily wage groups are the most at risk. A large number of farmers around the country who grow perishables are also facing uncertainty. Various businesses such as hotels and airlines are cutting salaries and laying off employees. The live events industry has seen an estimated loss of ₹3,000 crore (US$420 million).
In India, with a share of almost 90 per cent of people working in the informal economy, about 400 million workers or 40 crores in the informal economy are at risk of falling deeper into poverty during the crisis, according to ILO.
Let us have a look on the different sectors :
Unemployment Rate (of IT & other sectors)
While India does not have official high frequency labour market data, the unemployment rate put together by the Centre For Monitoring Indian Economy, or CMIE, shows a spike in the last week of March and the first week of April. The unemployment rate during the last week of March rose to 23.8 percent and stayed around those levels in the first week of April. The lockdown in India has left tens of millions of migrant workers . The coronavirus pandemic would have a debilitating impact on India’s tourism sector with the industry estimating an overall loss of Rs 5 lakh crore and job cuts for 4-5 crore people.
Of the total losses, the organised sector in the industry — branded hotels, tour operators, travel agencies which are the mainstay of the sector – may be hit the hardest with an estimated loss of around Rs 1.58 lakh crore, according to Confederation of Indian Industry estimates.
The industry body has said that branded hotel groups are set to lose as much as Rs 1.10 lakh crore, online travel agencies Rs 4,312 crore, tour operators (inbound and domestic) Rs 25,000 crore, adventure tour operators Rs nearly 19,000 crore and cruise tourism Rs 419 crore.
Consumer durables, automotive, auto components, white goods, capital goods, IT, startups and MSMEs sectors will be among the worst affected. The IT sector, which employs around 4 million engineers, is likely to witness around 5% job losses according to professionals.
About 1.5 crore people face job losses in India’s export sector following the cancellation of over half of the orders and a gloomy forecast for global trade due to the Covid-19 pandemic.
Electricity Consumption
With factories closed and power demand coming mostly from households, peak demand has plunged. The average demand during peak evening hours, i.e. 7 pm, contracted by 26.6 percent for April 1-10 2020 over last year, according to daily reports published by the Power System Operation Corporation Limited. Likewise, maximum demand during the day has seen a drop of 24.5 percent.
Consumption of Petroleum Products
With fewer vehicles plying on roads, consumption of petrol fell by 16.4 percent in March 2020 over a year ago, according to data from the Petroleum Planning and Analysis Cell. Diesel, consumed in factories and for plying commercial vehicles, saw a sharper hit as consumption fell by 24.2 percent year-on-year in March 2020. Analysts believe that fuel demand may fall by 2.3% in FY21.
PMI Barely In Expansion Zone
The two Purchasing Managers’ Indices complied by IHS Markit India showed slightly diverging trends. The Services Business Activity Index fell to 49.3 in March, down from February’s 85-month high of 57.5. The Manufacturing Activity Index saw a more modest fall to 51.8 in March, from 54.5 in February. This is because non-government services were the first to be hit even before a complete lockdown was announced. The Composite PMI stood at 50.6 in March compared to 57.6 in February 2020. A level above 50 denotes expansion, while a level below it suggests contraction.
Cargo At Major Ports
Cargo handled by Indian ports fell the most in five months, dragged down by a drop in liquid cargo and container volumes. Ports across the country handled 618.7 lakh tonnes of cargo in March, a decline of 5 percent over the year-ago period, according to data compiled by BloombergQuint.
Farm Arrivals
Farm Arrivals of agricultural commodities at key markets have fallen to a fraction of levels seen before a 21-day nationwide lockdown was imposed, data analysed by BloombergQuint showed. This, because of supply chain disruptions despite food items being classified as essential commodities. Data collated by BloombergQuint from Agmarknet, a government portal on agricultural marketing, showed a 15-76 percent decline in arrivals in the week of April 1-6 compared to the week of March 1-6. Overall, the total arrivals of major cereals, fruits and vegetables recorded across market centres fell to 3.09 lakh tonnes in the first week of April. This was 55.6 percent lower than arrivals seen a month ago. The drop in arrivals of agricultural commodities signals a disrupted supply chain ahead of the crucial harvesting season.
Manufacturing
Major companies in India such as Larsen and Toubro, Bharat Forge, UltraTech Cement, Grasim Industries, the fashion and retail wing of Aditya Birla Group, Tata Motors and Thermax have temporarily suspended or significantly reduced operations in a number of manufacturing facilities and factories across the country. Nearly all twowheeler and four-wheeler companies have put a stop to production till further notice. Many companies have decided to remain closed such as Cummins which has temporarily shut its offices across Maharashtra. Hindustan Unilever, ITC and Dabur India have shut manufacturing facilities expect for factories producing essentials.
E-commerce
In the third week of March, Amazon announced that it would stop sale of non-essential items in India so that it can focus on essential needs. Amazon has followed the same strategy in Italy and France. On 25 March, Walmart-owned Flipkart temporarily suspended some of its services on its e-commerce platform and will only be selling and distributing essentials. BigBasket and Grofers also run restricted services, facing disruptions in services due to the lockdown. Delhi Police began issuing delivery agents curfew passes to make it easier for them to keep the supply chain open. E-commerce companies also look for legal clarity related to what are “essentials. By this, they’re facing economic loss.
Stock markets
On 23 March 2020, stock markets in India post worst losses in history. SENSEX fell 4000 points (13.15%) and NSE NIFTY fell 1150 points (12.98%). However, on 25 March, one day after a complete 21 day lockdown was announced by the Prime Minister, SENSEX posted its biggest gains in 11 years, adding a value of ₹4.7 lakh crore(US$66 billion) crore for investors. On 8 April, following positive indication from the Wall Street that the pandemic may have reached its peak in the US, the stock markets in India rose steeply once again.
Tea
Due to logistical problems following the lockdown tea estates were unable to harvest the first flush. The impact of this on the second flush is not known. The entire Darjeeling tea based tea industry will see significant fall in revenue. Tea exports could drop up to 8% as a result.
Night lights
Night lights and economic activity are connected. In Delhi, night light radiance fell 37.2% compared to 1-31 March 2019. This was the biggest fall for any metro in India. Bangalore fell 32% while Mumbai dropped by 29%.
Chemical Industry
Some chemical plants have been shut down in China. So there will be restrictions on shipments/logistics. It was found that 20% of the production has been impacted due to the disruption in raw material supply. China is a major supplier of Indigo that is required for denim. Business in India is likely to get affected so people securing their supplies. However, it is an opportunity. US and EU will try and diversify their markets. Some of the business can be diverted to India which can also be taken as an advantage.
Auto Industry:
Its impact on Indian companies will vary and depend upon the extent of the business with China. China’s business no doubt is affected. However, current levels of the inventory seem to be sufficient for the Indian industry. If the shutdown in China continues then it is expected to result in an 8-10% contraction of Indian auto manufacturing in 2020.
Pharmaceuticals Industry:
Despite being one of the top formulations of drug exporters in the world, the pharma industry of India relies heavily on import as of bulk drugs. Due to the coronavirus outbreak, it will also be impacted. Textiles Industry:
Due to coronavirus outbreak, several garments/textile factories in world have halted operations that in turn affecting the exports of fabric, yarn and other raw materials from India.
Solar Power Sector:
Indian developers may face some shortfall of raw materials needed in solar panels/cells and limited stocks from China.
The real estate body Naredco has estimated that the sector would incur losses of Rs 1 lakh crore on account of COVID-19 and the subsequent lockdown and sought a $200-billion package from the government to kickstart the economy.
Estimate of economic losses
The Indian economy is expected to lose over ₹32,000 crore (US$4.5 billion) every day during the 21 day lockdown, according to Acuité Ratings, a RBI approved credit rating agency. Barclays said the cost of the 21 day shutdown as well as the previous two shorter ones will be total to around ₹8.5 lakh crore (US$120 billion).
On 27 March, Moody’s Investors Servicedowngraded its estimate of India’s GDP growth for 2020 from 5.3% to 2.5%. Fitch Ratings revised its estimate for India’s growth to 2%. India Ratings & Research also downgraded the FY21 estimate to 3.6%. On 12 April 2020, a World Bank report focusing on
South Asia said that India’s economy is expected to grow 1.5% to 2.8% for FY21. This will be the lowest growth for India in 30 years. The World Bank report said that the pandemic has “magnified pre-existing risks to India’s economic outlook”.
Confederation of Indian Industry (CII) has sought an economic fiscal stimulus package of 1% of India’s GDP amounting
to ₹2 lakh crore(US$28 billion). The fiscal package and fiscal policies approach is being compared to what has happened in other countries such as Germany, Brazil and Japan. Jefferies Group said that the government can spend ₹1.3 lakh crore(US$18 billion) to fight the impact of coronavirus. Bloomberg’s economists say at least ₹2.15 lakh crore (US$30 billion) needs to be spent. It is estimated that the loss to the tourism industry will be ₹15,000 crore (US$2.1 billion) for March and April alone. CII, ASSOCHAM and FAITH estimate that a huge chunk of the workforce involved with tourism in the country faces unemployment.
The government has to take some measurements to save the economy.
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