ON IMPACT OF NOVEL CORONA VIRUS (COVID-19) ON INDIAN ECONOMY

-- VIKAS PRABHAKAR

As Taleb says in one of his books, and as the COVID-19 pandemic points out, there is always an
unforeseen and unforeseeable aspect to the future. It has the potential to catch us off-guard. The
Corona outbreak has also emphasized, the murmurs of which we’ve been hearing from much before,
that globalization is a double-edged sword. True, the integration of the world, and its consequent
reduction into a ‘small village’ has led to spreading out of ‘good things’ of life across boundaries of
time and space. But so can spread ‘bad things,’ which would not have been the case in the pre-
globalization era.

In just over a month since it became a truly global concern, the repercussions on economy, not to
say on other aspects of our collective life, has been disastrous. At a time when the economic
prospects were not good to start with, with the world witnessing a slowdown, as too was India, the
arrival of this virus has cast a searing damage.

It has had its impacts on every component of our GDP from consumption, investment (private as
well as government) as well as to trade. The consumption has reduced firstly because of the
lockdown wherein the non-essential items are rarely being sold. Secondly, the public spaces like
hotels, restaurants, tourism, travel etc. are all being shunned by people, apart from the government
restrictions. Investments too have suffered because of low demand and difficulties in procuring raw
materials. Trade has reduced drastically due to restrictions on international shipments of cargo.
Additionally, the import-export items are low in demand as well as in supply.

It is still a matter of speculation whether India can turn out to be a bright spot in this global crisis.
Taking into account the resilience of Indian economy heretofore in dealing with crises, along with
reports from organizations like UNCTAD which are forecasting India to be least susceptible among
developing countries to any potential recession, we can remain optimistic. But we can be smug only
at our own peril.

Obviously, the effects will be varied on different sectors of our economy. Some will suffer only
minimal damage while some other sector(s) might be devastated.

The impact on any sector can be gauged by two considerations. Firstly, how much labor force is
employed in that sector. And secondly, how has the lockdown affected it.

Looking at different sectors, one finds that the MSME sector while contributing 30-35% of GDP,
employs about 114 million people, the largest of any sector. Due to reasons such as production
shutdown, cash flow constraints, supply chain disruption, ban on mobility (disrupting automotive
sector), it is likely to be most effected in this crisis. As MSME sector mostly consists of units which
are not privileged and mostly would not have the wherewithal to absorb the shock of this crisis,
therefore most likely they will be worst affected.

All in all, this pandemic will bring about a structural change in the economies across the world. The
voices of apprehension against globalization that were already on the rise even before the corona
outbreak, will most certainly only be strengthened afterwards. Greater localization will be one of the
many consequences. Self-sufficiency might become the buzzword among economists. Autarchy
might gain in reputation.
To conclude, the world will be a different place in coming times. Whether it will be a better place,
only time will tell.