COVID - 19: Impact of the Lock down in the Indian

Economy

Submitted By:

Dhritabrata Paul

SY MSc

SYMBIOSIS SCHOOL OF ECONOMICS

(Department of Symbiosis International (Deemed University) Accredited by NAAC with

‘A’ grade

3rd Floor, SCHC Building, Senapati Bapat Road, Pune – 411004.

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Abstract:

The overall number of cases and deaths recorded by COVID-19 is 23,077 as well as 718 by
24 April 2020 (Worldometer, 2020). This is a troubling scenario, as India will reach Stage 3 of
COVID-19 transmission in a few days with a wide population. If no appropriate therapy or
vaccination is used and if the epidemiological process is not completely known, it will be very
difficult to stop the spread of this virus. Graphical representation of the effects on the Indian
economy in the 21-day period is being carried out in this report. The decline in manufacturing
and how unemployment in India is rising are seen here. Our result suggests that 21 days lock-
down will have a huge impact in Indian economy. The non performing assets will increase as
unemployment increases, including retail loans (Sardar, Nadim, & Chattopadhyay, 2020). The
paper also shows some of the remedial measures that must be taken care of so that there is a
boost in the economy as soon as the lock down gets over. Honorable Prime Minister Narendra
Modi will ponder deeply in the interest of protecting people from death before he can seek some
political suggestions on expanding the lock down. (Jagannathan, 2020) But, there are no
situations where the lockout stops suddenly and it has to be done in stages by keeping a balance
between Covid 19 hotspots and economic needs. . Life itself is less relevant without livelihoods.
Just as the right antidote to sickness is a healthy body, the right antidote to Covid-19 in the
medium term is a healthy economy. (Jagannathan, 2020)

Keywords: COVID-19; Graphical review; Lock down; Hotspots; Unemployment; Livelihood.

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 Covid-19: Impact of the Lock down in the Indian Economy

1. Introduction:

On 31st December 2019 in Wuhan Town, Hubei Province, the China Health Agency alerted the
World Health Organization (WHO) of multiple pneumonia in central China with uncertain
etiology. The recorded case has been on the Huanan Seafood Wholesale market since December
8, 2019, where several people employed or stayed, while many early cases were without access
to this sector. (Lu, Stratton, and Yi-Wei, 2020). A new corona virus was reported on January 7
from the throat swab sample of a patient, initially abbreviated as 2019-nCoV by the WHO. The
pathogen was later named as the Corona virus belonging to the Study Group SARS-CoV-2, and
the WHO identified the 2019 COVID (COVID-19) as a severe respiratory syndrome. As of 21 st
April, 2,496,372 cases were reported and number of active cases is 1,669,348 in the whole world
were identified. (COVID-19 Dashboard by the Center for Systems Science and Engineering
(CSSE) at Johns Hopkins University (JHU), (2020). The WHO has declared the epidemic of
SARS-CoV-2 an International Public Health Emergency (PHEIC). The epidemic is growing
quickly across mainland China and has now entered many nations. Several cases of unexplained
pneumonia have been identified during the early stages of this virus outbreak. Severe respiratory
illness signs were reported in doctors and other individuals with quickly increasing acute
respiratory distress syndrome, acute respiratory insufficiencies and other significant dangerous
complications. On 7th January, 2020, the Chinese Center for Disease Control and Prevention
(CCDC) identified this infection as novel Corona Virus and on 11 th February, the WHO
announced a new name for this pandemic which is now known as the COVID – 19 as it was
originated in the year 2019. The National Health Commission of China announced a 2.1 percent
mortality rate in acceptance cases in China as of 4 th February and a 0.2 percent mortality rate in
the cases outside China. The mortality rate ranged from 11 to 15 percent for hospital-admitted
patients which basically reveal that COVID-19 is mildly contagious.

Both global markets are tightly interconnected in this new era. It will have a low to large
influence globally if it occurred in some region of the world. This would have a significant
impact on one of the largest economies like China in the world. Worldwide, over 25 million
workers are reported to be affected by corona-virus spread by the International Labor
Organization (ILO). Four individuals out of five (81 percent) of the global 3.3 billion population
are projected to be impacted by full or partial employment closing. Kristalina Georgieva, director
of the International Monetary Facility (IMF), said that since the great depression of the 1930s the
world has been experiencing the toughest global downturn (PTI, 2020). In developing countries
and low income jobs, the industries and services have a large share of these informal workers
which make up 61 percents of the world's labor force. There are high concerns for informal, low
pay and low skilled workers. This utter lack of wealth is devastating to them. The aim of this

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paper is to analyze the difference between the pre pandemic and the post pandemic situation of
the work force in India.

2. Background:

Honorable Prime Minister Narendra Modi announced as ‘Janta Curfew’ on 22 nd March, Sunday,
followed by a complete 21 day lock down from 24 th of March across India and requested all to
remain socially distant. He spoke about people that come from outside or other nations being left
isolated or in quarantine. Realizing no fall in the death rate, the lock down got extended till 3 rd of
May. Just a little over one-fourth (27.7 per cent) of the overall working age population (15-59
years) of 1003 million, or 285 million jobs, worked after the lockdown in a few days (the last
number before lockdown was 44 million, according to the Center for Monitoring the Indian
Economy (CMIE report). This shows that within the two-week period of lockdown, 119 million
workers have lost their jobs. If we presume that one-half (60 million homes or 300 million
people) of India's households, on the basis of the census of 2011, are a family members with an
average family size of five households, it may face a severe survival problem and about 227
million households are badly affected. The CMIE study reveals that employment has declined
dramatically and unemployment has risen significantly in March 2020. In March 2020, the
unemployment rate stood at 8.7%, just above the projected state unemployment level for 2017-
18 at a height of 45 years of 6.1%. After September 2016, this is the largest unemployment rate.
The unemployed people have also gone up from 32 million to 38 million during the same period.
The situation became further worse as we moved into the lockdown period in the last week of
March and the unemployment rate soared to 23.8%.

Such projections, though, simply reflect the effect on employment during the lock-in era and
cannot be viewed as a complete lack of livelihood. After the lockout is over, several of them
would return to work. Nevertheless, it is clear that many of them, such as migrant employees
who engage in seasonal or contract jobs and many who have moved to their communities, do not
come home. The five major impacted industries in urban areas are the manufacturing (28
million), retail, hotel and restaurants (32 million), building (15 million), shipping, storage and
communications (11 million) and banking, enterprise and real estate (7 million). This sector is
influenced by approximately 93 million informal staff. 50% of the 93 million unpaid employees
operating in these sectors are self-employed, 20% are seasonal day-to-day wage jobs, and 30%
are wage and contract employees without any network of social security. Casual employees are
considered the most disadvantaged in the building industry because of the irregularity of their
jobs and the lowest average wage earned. Therefore, some frequent staff, those who are currently
not in service, skilled workers and small shopkeepers who may sit idle at home or come back to
their homes or remain in the lodgings will not be able to rebound from the lockout time.

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Federation of Indian Chambers of Commerce and Industry (FICCI) tried by conducting
collaborative sessions and surveys among industry leaders to assess the immediate effect of
corona virus on companies around the world. In the report, businesses have also had a declining
economic operation that is impacting all expenses, including employer's wages, interest, loan
repayments and taxation, besides direct effects on production and supply of products and
services. The survey result showed:

 Major 53 percent of Indian companies have been seen to have a major effect even in early
stages on company activities as a consequence of the Corona virus pandemic.

 Cash management in companies has been greatly impacted by the pandemic with
approximately 80% recorded cash flow loss.

 The pandemic has had a huge effect on the supply chains, as more than 60% of the
respondents claim their supply chains have been impacted. The corporations have also
found out that they track the situation cautiously and anticipate the pandemic's effect on
the supply chain to escalate further.

Although the job of home proposal presents obstacles for certain industries, it has a strong
impact on market activities. It is valid in particular in the industrial industries where workers are
expected to be physically present at the production sites and services industries such as banking
and IT. But it is important for firms working in these industries to do research from home
without sacrificing day-to-day jobs, which is not the case for the workers from the informal
sector.

So, it is necessary to study the effect of the extended lock down on the labor market and also
what are the possible ways through which India can regain its growth.

3. Literature Review:

According to (Ozili and Thankom, 2020), why has a global recession contributed to a health
problem? How the world economy coping with the spread of the corona virus? The solution lies
in two approaches that crippled economic operations through corona virus. Firstly, the virus
spread promoted social isolation and contributed to financial markets, companies and events
being shut down. Furthermore, a race to public health and business protection by customers,
creditors, and foreign trade partners contributed to the rapid development of the epidemic, and
the resulting confusion as to how bad the condition will be.

(Sardar, Nadim, and Chattopadhyay, 2020) The authors consider a new mathematical model for
COVID-19 transmission, with a lock-down effect and transmission variability among

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symptomatic and asymptomatic populations. The influence on reduction cases and deaths of
current 21 days was measured using average COVID-19 cases notified from three states
(Maharashtra, Delhi, and Telangana), and from overall India. A specific lock-down performance
rate is observed for lock-down results. The outcome indicates that 21 days of lockout in
Maharashtra and in India as a whole would have no effect. They also compared approximate
samples of parameters for the four locations described. They noticed a link between the lock-
down impact and the percentage of symptoms in an area. The finding indicates that a greater
proportion of patients affected in a area results in a substantial reduction in the amount of
reported cases and fatalities related to multiple lock-downs.

A very limited amount of study has been done on this topic. But, as the virus has been spreading
rapidly, which cannot be controlled through any vaccines, there are need of certain studies which
would suggest what are the possible ways in which an economy should progress when the lock
down gets over.

4. Research Questions:

1. What is the current scenario of the labor market?

2. What is the impact of the lock down?

3. How can India regain its growth after the lock down/pandemic gets over?

5. Data:

The Study is completely based on the secondary data. The required data are collected from
databases such as Worldometer, CMIE database, and various newspapers, articles and journals.

6. Methodology:

In this paper we present a graphical analysis of how the novel corona virus is affecting the Indian
economy. The paper also talks about the possible ways through which India can regain its
economic growth as sson as it recovers from the Corona virus pandemic.

7. Current Scenario of the labor market:

Although we are waiting to get an analysis of the corona health virus curve in India, the first
work destruction evaluation from the national lockdown is already available. The figures are

6
crazy, higher than ever recorded in the country. Over the last two weeks more workers have been
destroyed over India than all in global history. Today, India has around 137 crore inhabitants.
(India Population, 2020). Around 103 lakh, having age more than 15 years, is in the working
population. At that point, 3.4 crore were unemployed. The CMIE reports that just 27.7% of the
population (103 crore) were working in the week after lockout started, as opposed to statistics
last week. This operates for a crore of 28.5. In two weeks' period, the amount of productive staff
decreased from 40.4 crore to 28.5 crore, which reflects an additional 11.9 crore. The condition is,
however, that in the last two weeks, about 12 Crore Indians have lost their employment. Suppose
that eight of these crore was their family's primary or only earner. Thus, the livelihood crisis may
occur to one-third of a country's 25 crore households (2011 government data). Comparing them
with the U.S’s Great Depression can now be seen that there were about 1.5 crore people
unemployed at its height, in and around 1932-33. The unemployed in Europe could then be
removed, but 5 crore could not be crossed. For the full month of March, CMIE estimated the
jobless rate to be 8.7 percent compared with 7.8 percent in February 2020 (Goswami, 2020).
This is apparent that jobs has dropped significantly and that unemployment has increased at the
same period in March 2020, according to CMIE whose survey sizes typically reach 117,000
people for monthly figures. There were 3, 79 crore of unemployment accounted who were
pursuing a career actively. This is the largest since the 3, 85 crore unemployed were involved in
their work hunt in October 2016. India's workforce exceeded 43.3 crore in March 2020.
Meanwhile, during the week of March 29, because of the nationwide lock down as suggested by
PM Modi, the Consumer Pyramids Household Survey (CPHS) was halted. (Vyas, 2020)

8. Impact of Lock down

(a) Rise in unemployment

The national lock declared to suppress the spread of the corona virus has infected businesses,
according to the ICRA, and their activities ceased. The worries regarding Covid-19 have been
reduced to a domestic and foreign market shock owing to the effects of imports from China with
social distancing and locks in certain areas contributing to shutdowns of output and job losses. At
the national stage the influence of the crown pandemic could have a longer-term effect on some
other industries, especially if demand is at a discretionary point, resulting in stagnation in
domestic needs, deterioration purchasing power due to losses at employment or wage cutting and
the trickle-down consequences of demand deferment. The rating agency stated that global
economic recession and lockouts would influence areas that are highly dependent on external
demand in particular those in major effect markets such as Europe, North America and Southeast
Asia. It said lower global demand and the price of goods such as oil and gas, metals, would have
an effect. The below chart shows the rise of the unemployment in the time of Covid – 19, in
comparison to the previous years.

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 Unemployment rate (>=15)%
Months 2016(%) 2017(%) 2018(%) 2019(%) 2020(%) (Till March)
January 8.72 5.93 5.10 6.86 7.16
February 8.46 5.51 5.87 7.20 7.78
March 8.73 4.67 6.00 6.65 8.74
April 8.90 3.87 5.57 7.35
May 9.65 4.03 5.14 7.03
June 8.91 4.12 5.75 7.87
July 8.51 3.37 5.66 7.34
August 9.59 4.07 6.27 8.19
September 8.43 4.63 6.47 7.16
October 6.71 5.00 6.83 8.10
November 6.51 4.72 6.65 7.23
December 6.40 4.74 7.02 7.60
Table 1:CMIE Data

Unemployment rate % (>=15)

12
10
8
Unemploymen rate (%)

2016
6
2017
4 2018
2019
2
2020
0
ar
y
ar
y
rc
h ril ay ne Ju
ly st be
r
be
r
be
r
be
r
nu r u a Ap M Ju u gu m to m m
Ja b M A e Oc ve ce
Fe pt De
Se No

Months

Fig 1

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A clearer picture can be shown if we compare between the pre pandemic scenarios of
unemployment with the prevailing one. The data are considered as a two month moving average.

Indian Unemployment Data

Date Unemployment Rate (%)
07-04-
2019 7.90
09-06-
2019 9.00
11-08-
2019 8.90
06-10-
2019 8.40
08-12-
2019 8.30
09-02-
2020 8.50
05-04-
2020 23.4
Table 2:CMIE Data

Unemployment Rate (%)

25

20
Unemployment Rate (%)

15
Unemployment Rate
10

0
09/06/2019 11/08/2019 06/10/2019 08/12/2019 09/02/2020 05/04/2020
Monthly Dates

Fig 2

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 Unemployment Rate Daily( %)
Date Unemployment Rate (%)
30-03-2020 8.49
31-03-2020 8.76
01-04-2020 9
02-04-2020 9.24
03-04-2020 9.41
04-04-2020 9.84
05-04-2020 10.09
06-04-2020 10.45
07-04-2020 10.93
08-04-2020 11.6
09-04-2020 11.91
10-04-2020 12.22
11-04-2020 12.92
12-04-2020 13.53
13-04-2020 14.54
14-04-2020 15.57
15-04-2020 16.64
16-04-2020 17.83
17-04-2020 18.69
18-04-2020 20.34
19-04-2020 21.58
20-04-2020 23.61
21-04-2020 23.53
22-04-2020 23.79
Table 3: CMIE Data

Unemployment Rate Daily(%)

25
20
Unemployment DAily (%)

15
10
Unemployment Rate
5
0
0 0 0 0 0 0 0 0 0 0 0 0
2 02 2 02 20 2 20 2 20 2 20 2 20 2 20 2 20 2 20 2 20 2 20 2
3/ 4/ 4/ 4/ 4/ 4/ 4/ 4/ 4/ 4/ 4/ 4/
0 /0 1/0 3/0 5/0 7/0 9/0 1/0 3/0 5/0 7/0 9/0 1/0
3 0 0 0 0 0 1 1 1 1 1 2

Dates

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 Fig 3

The Labor Report of March 2020 was alarming. Yet things have become even stronger over the
past two weeks. In April 2020, the unemployment rate hit an all-time peak of 23.8%. In March
2020, the labor rate was 41.9%. In February it was 42.6% and in March 2019 it was 42.7%.
Because of the national closure to curb the spread of corona virus, CMIE data expected a decline
in labor participation levels. Yet just before the lockout, this decline appears to have happened.
The rapid 9 million decreases in the population in the March Labor Participation Rate (LPR)
occurred from 443 million in January 2020 to 434 million in March 2020. This fall's components
say of the times. The population is made up of both the working and unemployed people who
actively pursue jobs. From January to March, the number of people working fell from 411
million to 396 million, whilst the number of unemployed increased from 32 million to 38
million.

In March, there was an unemployment rate of 8.7%. In 43 months, this is the maximum rate of
unemployment. And, from September 2016 onwards. From the 7, 16% point of January 2020,
the rate rising very steeply. From its low point of 3.4 percent in July 2017, the unemployment
rate has gradually increasing. In March 2020, however, the 98 basis point change over the
previous month was reported as the highest monthly rise. And the 158 base point rise in March
2020 for two months is still the biggest change in the last two months.

As we step into the lock-up era, the scene gets even worse.

(b) Fall in Industrial Production

The lock-down is excluded from power generation, steel processing, fertilizers, fuel, drugs,
petroleum products and mining. Output in these sectors continues. Exceptions are made for full
lockdowns and, pursuant to guidelines provided by the Ministry of Health and Family Welfare,
some factories or industries manufacturing non-essential goods that function in some States after
April 20, 2020. However, while the majority of the market is tied shut, no company will work
alone. But exempted sectors face rising competition, labor shortages and fragmented supply
chains. Data are compiled as four month moving average.

Table 4: CMIE Data Table 5: CMIE Data

Consumption of Petroleum Y-o-Y( % change) Power Generation Y-o-Y( % change)

Dates Consumption of Petroleum Dates Power Generation
Mar-17 -0.60 Mar-17 5.80
Jul-17 2.10 Jul-17 3.70
Nov-17 7.30 Nov-17 2.10
Mar-18 7.20 Mar-18 3.70
Jul-18 6.90 Jul-18 4.70

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Nov-18 -3.40 Nov-18 4.50
Mar-19 5.00 Mar-19 5.40
Jul-19 3.80 Jul-19 5.60
Nov-19 8.80 Nov-19 -6.10
Mar-20 -17.80 Mar-20 -8.80

Production of Finished Steel Y-o-Y(%

Off take of Coal by CIL Y-o-Y(% change) change)
Dates Off take of Coal (%) Dates Production (%)
Mar-17 6.50 Mar-17 8.60
Jul-17 6.90 Jul-17 21.50
Nov-17 5.30 Nov-17 16.90
Mar-18 5.70 Mar-18 12.80
Jul-18 8.70 Jul-18 -20.10
Nov-18 1.10 Nov-18 -20.10
Mar-19 7.80 Mar-19 -20.60
Jul-19 -2.80 Jul-19 5.50
Nov-19 7.60 Nov-19 -0.10
Mar-20 -10.30 Mar-20 -27.40
Table 6: CMIE Data Table 7: CMIE Data

Consumption of Petroleum
15
10
Consumption (%)

5
0 Consumption of Petroleum
-5l/17 17 /1
8
l/1
8 18 /1
9
l/1
9 19 /2
0
Ju o v/ ar Ju ov/ ar Ju o v/ ar
N M N M N M
-10
-15
-20
Dates

Fig 4

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 Power Generation
8
6
Power Generated (%)

4
2
0 Power Generation
Jul/17
-2 Nov/17 Mar/18 Jul/18 Nov/18 Mar/19 Jul/19 Nov/19 Mar/20
-4
-6
-8
-10
Dates

Fig 5

Consumption of oil products fell 17.8% in March 2020 compared with a year earlier. This was
the largest decline since monthly data on petroleum usage were released in 2004. So, in at least
16 years this would be the biggest fall. The fuel efficiency fell by 24.2% for the high speed
Diesel, 16.4% for the aircraft and 32.4% for the aviation generator, 34.9% for oil lubrication and
41% for bitumen and asphalt. For a month where the lockout was just partial and the industry
was excluded from development, such are exceptional declines. Around 11.8 of the IIP were
made up of coke and processed petroleum products.

An extra 8% of IIP is needed for power production. In March 2020, electricity generation fell by
8.8 percent relative to March 2019. Each of the four months of September to December 2019
saw y-o-y decreases in the power production in view of sluggish economic activities until the
lockout. March has even made a decline now. Therefore, the decline in power production was 5
of the 12 months of fiscal year 2019-20. Reports show that, on the first day of lock down, the
average demand for energy dropped to 2.8 billion units from 3.5 billion units until locking on 25
March. That can be seen in the dropping of 8.8% in the whole month. Yet this is just a hint of the
possible decline in April, rather than the 20% drop shown on the first lock down day.

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 Off take of Coal by CIL
10
off take of Coal (%)

0
Off take of Coal
Jul/17 Nov/17 Mar/18 Jul/18 Nov/18 Mar/19 Jul/19 Nov/19 Mar/20
-5

-10

-15
Dates

Fig 6

Production of Finished Steel

30
20
Production (%)

10
0 Production of Finished Steel
-10l/17 7 8 8 8 9 9 9 0
v/1 r /1 l/1 v/1 r /1 l/1 v /1 r /2
u a u a u a
J
-20 No M J No M J No M

-30
Dates

Fig 7

Coal output in March was confirmed to have been in full swing. In March 2020, the CIL coal off
take decreased by 10.3%. Inventories have been rising with coal companies and also with power
generating companies.

Demand also limits steel production. In March 2020, gross manufacturing of finished steel
declined 27.4% y-y, the worst ever decline since series beginnings in 1995, according to the Joint
Plant Committee (JPC). During the month it was manufactured only 6.7 million tons of finished
steel. Throughout the 2019-20 periods, steel output contributed to 8 to 9 million tons per month.
Steel plants that operate large blast furnaces and coke ovens that cannot be turned off
completely, faces a serious problem because of the lack of demand. Both of these declines have
been significantly offset by demand for housing, building, vehicles and consumables.

14
Companies of fertilizer have confirmed or allegedly dramatically decreased demand. GSFCL is
the pioneer in sales of diammonium Phosphate (DAP) on the industry. Gujarat State Fertilizers &
Chemical Ltd. Once of its plants in west Gujarat has been completely shut down, although other
plants have cut capacity by 50%. The President of Nagarjuna Fertilizers and Chemicals said that,
owing to decreased manpower, the U. S. Jha may not operate on maximum efficiency. Urea
prices increased by 19.2% in March 2020, the largest change since March 2018. Medicines,
soaps, detergents and newspapers have also been exempted from the lockdown. Collectively,
these account for 7.4 per cent of the IIP. In the unorganized industries, it can be anticipated that
the impacts of the substantial decline in industrial activity in the organized field covered in IIP
will be even higher. This would trigger a big hit in industrial output given the exception of more
than half of sectors during lockout by weight in the IIP.

(c) Lock down Hits Household Income

The national lock-up suddenly and dramatically influenced the emotions of the family-its current
existence and prospects. The index was 102.5 during the first week of March 2020. The number
of successful cases rose to 96 at the end of the second week and the customer satisfaction index
to 101.8. The number of cases rose to 329 during the 'Janta Curfew,' and the customer
satisfaction index declined to 98, 8. This was the first year in which the index dropped below its
100th level. It was also the fourth week in a row of the index decline.

% of Household Facing Change in Income

Dates No Change in Income (%) Rise in Income (%) Fall in Income (%)
28-04-
2019 58.00 33.30 8.80
30-06-
2019 58.20 33.20 8.60
25-08-
2019 54.50 37.20 8.30
27-10-
2019 59.10 31.80 9.10
29-12-
2019 56.60 36.50 6.90
23-02-
2020 60.20 31.10 8.80
12-04-
2020 43.70 10.60 45.70
Table 8: CMIE Data

15
 Lock Down hits Household Income
70
60
50
40
% of Household

30 No Change in Income(%)
20 Rise in Income(%)
10 Fall in Income(%)
0
19 19 19 19 20 20
20 20 20 20 20 20
6/ 8/ 0/ 2/ 2/ 4/
/0 /0 /1 /1 /0 /0
30 25 27 29 23 12

Dates

Fig 8

An index has been created by the Economic Outlook. The index of current economic conditions
is derived from responses to two questions. These are - (1) how is the household getting along
financially nowadays compared to a year ago - are they better off, worse off or the same as then;
and (2) is now a good time or a bad time to buy durables like refrigerators, television and things
like that, or is it no different from other times. The responses have been shown diagrammatically.

Three opinions regarding the future are focused on the graph of customer preferences. Firstly, the
household's financial circumstances are predicted one year later. Just 10% of households planned
to change their financial situations in a single year during the last week of March 2020. This
figure dropped to less than 9 percent in the first quarter of April. Previously, this proportion was
between 33% and 25%. And equate this to 45% that claimed that, relative to the previous year,
they're worse off. But most people are not looking forward to a year's rehabilitation.

The second view about the future is regarding business conditions a year later. Here, only 2 per
cent of the households saw business conditions improving over the next one year and 59 per cent
saw it worsening. This pessimism about the future of business in general is perhaps, feeding into
their pessimism about their own well-being in the near future.

Households often have a lot of dumbness in the long term. Just 3% of households polled during
the first quarter of April thought market conditions would change in the next five years and some
45% thought business conditions would deteriorate. This intense awful vision of the future
renders it especially impossible to restart the economy after the lockout has been removed.
Confidence in the future is critical. Statistics show that the lockout risk is immense. Nearly half
of households are still declining and others have little hope of restoration.

16
Apart from the above scenarios, the projects those were undertaken are in sure risk of remaining
incomplete. Because of the pandemic, Project promoters seem to have postponed project
completions. So, all the projects must get started as soon as the pandemic gets over to regenerate
the economic growth of India.

9. India: Regaining Its Growth

“We should now plan for what happens after the lockdown, if the virus is not defeated. It will be
hard to lock down the country entirely for much longer periods, so we should also be thinking of
how we can restart certain activities in certain low-infection regions with adequate
precautions.” – Raghuram Rajan, former Reserve Bank of India Governor. (Rajan, 2020)

Plan for Needy Households: In the meantime, India clearly wants to insure that deprived and
impoverished middle classes, who are denied long term jobs, will thrive. As some analysts have
found out, direct transfers to households will hit much, though not all. The State and the Center
will work together quickly in order to recognize the different forms of contribution provided by
state and non-governmental organizations (food, health services, or shelter), private involvement
(including mutual debt moratoria and Public bans on evictions throughout the coming months),
and grants of social support to disadvantaged households in the coming months. One result of
that has already been seen: the migrant labor movement. Another participant can fight the
lockout to get back to work, otherwise they cannot live. Owing to such condition of the
economy, it is high time that people should work hand in hand with each other. That does not
mean that we can ignore our budgetary constraints, especially given that our revenues will also
be severely affected this year.

Exchange Rate Worries: A decline in ratings, combined with a loss of investor confidence, could
lead to a decline in the currency rate and to dramatic increases in the long-term interest rates for
our financial institutions. Therefore we need to prioritize, cut back or postpone lower-sized
expenditures, while concentrating on urgent needs. In order to reassure creditors, the State should
voice its commitment to return to fiscal rectitude by supporting its plan, as suggested by the NK
Singh committee, to create an autonomous fiscal Council and a medium-term debt objective.
Small Industrial Development Bank of India may further improve the loan guarantee terms of its
bank loans, but at this point it is doubtful that banks can take much more lending risk.
Incremental loans to SMEs, equal to the quantity of income taxes paid by SMEs in the last year,
the Government should assume liability. This reflects the possible future contribution of the
SME to the exchequer by the government and today it provides easier access to funding.
Naturally this does not benefit the SME because it is forbidden to direct the SME to refund the
bank's past credits using the assured loan. (Rajan, 2020)

Role of RBI: Large corporations may also be a way of supplying their smaller suppliers with
funds. In bond markets, they will generally collect money and pass it on. Unfortunately,
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corporate bond markets are not very receptive to issues today. Banks, insurance companies, and
bond mutual funds should be encouraged to buy new investment-grade bond issuances, and their
way eased by the Reserve Bank of India agreeing to lend against their high-quality bond
portfolios through repo transactions.

In order to allow the Reserve Bank to conduct these transactions, RBI's law would have to be
changed and the Bank will apply appropriate cutbacks to such portfolios to reduce its credit risk.
The government should also allow any department and unit of the public sector, including at
national level, to immediately pay its bills, to ensure useful liquidity for private firms. (Rajan,
2020)

Finally, in the financial field, there are certainly problems in both the household and business
markets. Although the bank has saturated the banking system with liquidity, it may have to go
beyond lending, for example to well-managed NBFCs, against high-quality collateral. Further
liquidity, however, does not lead to loan losses. The non performing assets will increase as
unemployment increases, including retail loans. In order to create capital reserves, the Reserve
Bank will accept the moratorium on dividend payments by financial institutions. Nevertheless,
some institutions can need more capital, and the regulator needs to prepare.

Need for Bipartisanship: To assist in managing its response, the Government needs people with
proven experience and skills, so many of whom exist in India. He might also want to cross the
political alley to attract opposition leaders who have experienced tremendous stress such as the
global financial crisis in previous years. Yet if, with the same overworked staff, the Government
insists on driving something out of the Prime Minister's Office, it's too little, too late. Once the
government has the response under control – and hopefully India’s hot temperatures and
humidity will weaken the virus transmission – it has to rebuild hope.

“It is said that India reforms only in crisis. Hopefully, this otherwise unmitigated tragedy will
help us see how weakened we have become as a society, and will focus our politics on the
critical economic and healthcare reforms we sorely need.” - Raghuram Rajan, former Reserve
Bank of India Governor.

10. Conclusion:

US President Donald Trump has declared that the US economy must start rolling after the Easter.
With 4, 00,000 marks with over 12,000 deaths, Trump may act as a complete heartless man,
uncaring about the sufferings of his people, but the continuous decline in the jobs and growth
will have a huge impact on health and survival for the weaker section of the people.
(Jagannathan, 2020) Prime Minister Narendra Modi is facing tremendous pressure from several
State Heads and his health department in India to extend the lock to avoid infection. The IT
industries are now in operation and the amount of citizens contaminated is increasing after they

18
have begun their everyday jobs. And it remains unknown whether the lock down will get over by
3rd May. During the decision-making period, India may hit a high of 30.000 Covid 19 infections
in India and can further double in the week that follows. There would be an eagerness to stretch
the lock down so he must stop it. There is no situation where the lockout stops suddenly and it
has to be done in stages by keeping a balance between Covid 19 hotspots and economic needs. 
The government has to find options to open the lock down by May 3 rd. Modi should open up
certain places where there are very less or no cases registered in the past 14 days. The lock down
in the more disease prone areas can be extended considering the situations.

Long-term lock-out from Covid would deepen our systemic unemployment. Pressure would
intensify on the state to continue to offer taxes without creating employment. Following the
pandemic, civil turmoil is likely to cease. Narendra Modi will ponder deeply in the interest of
protecting people from death before he can seek some political suggestions on expanding the
lock down. Some remedies are worse than the illness and the condition is considered life-
protection loss. Life itself is less relevant without livelihoods. Just as the right antidote to
sickness is a healthy body, the right antidote to Covid-19 in the medium term is a healthy
economy. (Jagannathan, 2020)

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