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Impact of COVID-19 on Indian economy

Home / Article & Blogs / Articles / Impact of COVID-19 on Indian economy
By Team ABSYZ inArticles

The impact of COVID-19 worldwide has been profound to say the least. From Africa and Europe to Asia and the Americas, almost no continent has been spared of its wrath. If we talk about the negative impact of Coronavirus, the list is long – lakhs of casualties till now, millions of infected people and counting, sudden curfews and long lockdowns, loss of livelihoods, loss of economy, social anxiety and the medical / healthcare system constantly battling against the pandemic, even given their constraints. 

US, Brazil and India are the three countries where the most number of Coronavirus cases have been found till now. According to a recent data point, around 65,000 fresh COVID-19 cases have been detected in just a single day in India. However, the cumulative death toll is under control and recovery rate is quite good too. The point of worry is – the pandemic doesn’t seem to be slowing down, leaving countries and their economies dependent on pro-active planning and some tough decision making. Let’s understand in detail the impact of COVID-19 on Indian economy:

  • Disruption in supply chains: India had been importing 45% of its electronics from China alone. If we talk about machinery and organic chemicals, the statistics are again high. Around 33% of machinery and 40% of organic chemicals used to be imported from China. Even in automotive parts and fertilizers, China’s contribution was more than 25%. The most astonishing fact is that more than 90% mobile phones came from China to India and around 75% of pharmaceutical ingredients were sourced from there. With the outbreak of Coronavirus, India has stopped importing most of these goods. This development has disrupted the supply chain and broken-down different levels of supplier networks. A lot of businessmen have received a strong set back in their trading deals.
  • Fall in household income and marketing expense: In response to the turmoil of Coronavirus, RBI and the Government of India have come up with concrete steps, such as reduction in repo rate, boost to liquidity in the system and regulatory relaxation by extending moratorium. Sluggish businesses, payments deferrals, and subsided loan growth have impaired the health of the economy. Deceleration of GDP growth, reduction in discretionary expenses and CAPEX have resulted into fall in marketing spends and household incomes. However, it is expected that reduced oil prices and healthy balance sheets would revive growth once the lockdown gets completely ended.
  • Loss in hospitality and travel industry: The pandemic has left a debilitating impact on India’s tourism sector, with an overall loss of around Rs 5 lakh crore. Around 4-5 crore people hitherto working in this sector have lost their jobs. According to estimates by CII, the most organized sectors of the industry – tour operators, travel agencies, and branded hotels have been hit the hardest, with an estimated loss of around Rs 1.6 lakh crore. Though domestic flights have been started, people are avoiding travel through aviation, which has again brought huge losses to the industry. Even hotels and motels are suffering from down period. Average hotel occupancy has dropped by over 45%. In fact, revenue per available room has witness a significant decline of 31%-36%.
  • Worst losses in stock market: Ever since COVID-19 has arrived, stock market has seen a major fall. Both BSE Sensex and Nifty have fallen down by around 38%. From the start of the year, the total market cap has lost a staggering 27%. Certain sectors such as hospitality, tourism and entertainment have been adversely impacted. Stocks of such companies have dropped by over 40%. On 23rd March 2020, stock markets in India had stooped to record lows.
  • A few gains through PPE kit and ventilator exports: In collaboration with the government, India’s capacity to manufacture PPE kits has increased. According to a recent report, the country is producing around 6 lakh personal protective equipment (PPE) kits per day. We have also improved on our nation-wide capacity to produce ventilators and are also exporting a portion of them.
  • Growth of e-learning programs: Since March 2020, millions of youngsters in India have got affected due to COVID-19. The pandemic has brought major losses to most of the industries. However, it has triggered a good 25% hike in the e-learning industry. Digital initiatives taken by the government comprise of the DIKSHA portal that serves as nation-wide digital education infrastructure, especially for teachers. And, ‘e-Pathshala’ has arranged web resources for students, researchers, parents and educators in rural areas.
  • Disturbance in miscellaneous industries: Apparel and textile industries have been hit badly due to raw material unavailability, shortage in labor supply, restricted movement of people, and purchasing inability. In fact, auto sector (auto parts and automobile) is continuously facing challenges on account of falling income levels and lack of demand. Talking about construction / real estate industry, there is a lack of sales and high-interest payments.

Undoubtedly, the outbreak of COVID-19 has hit economies hard the world across. For India too, it’s a challenging situation. Extended lockdown and fear of / restrictions on movement have severely impacted our economy. At the same time, a silver lining is that a lot of infected people are recovering quickly. Our medical teams are also putting considerable efforts to develop a vaccine. We all need to be positive, follow precautions and stay safe. Like everything else, this too shall pass and once again, with everyone’s efforts, our economy will see a boom.

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