ECONOMICS

PROJECT

BY,
KRISHNA AGARWAL
CLASS 11-D
 INDEX
1. Introduction of the topic-Impact of Covid-19 on Indian
Economy
2. Brief description of the different sectors of an economy
3. Impact on primary sector (agriculture and supply chains)
4. Impact on secondary sector-industries- Consumer
durables, electronics, automobile industries or any other
5. Impact on service sector-Tourism & Aviation, Hospitality,
Information technology (IT)
6. Impact on Trade (overall export and import)
7. Choose any one country other than India (for example
United Kingdom, USA, China, Italy, Spain) and make a
comparative analysis of the impact of Covid-19 on
consumer durable industries, electronics, automobiles
and trade of that country with that of India.
8. Conclusion
9. Acknowledgement
10. Bibliography
 ACKNOWLEDGEMENT
I would like to express my special thanks of
gratitude to my teacher, who gave me the
golden opportunity to do is wonderful project on
Impact of Covid-19 on Indian Economy. It also
helped me in doing a lot of research and this
made me come across many new things adding
to my knowledge.
Secondly, I would also like to thank my friends
who helped me in doing research for this project
within the given time.
I am making this project not only for marks but
also to increase my knowledge.
Introduction to the topic
The economic impact of the 2020 coronavirus pandemic in India has been largely disruptive. India's
growth in the fourth quarter of the fiscal year 2020 went down to 3.1% according to the Ministry of
Statistics. The Chief Economic Adviser to the Government of India said that this drop is mainly due to
the coronavirus pandemic effect on the Indian economy. Notably India had also been witnessing a pre-
pandemic slowdown, and according to the World Bank, the current pandemic has "magnified pre-
existing risks to India's economic outlook".

The World Bank and rating agencies had initially revised India's growth for FY2021 with the lowest
figures India has seen in three decades since India's economic liberalization in the 1990s. However after
the announcement of the economic package in mid-May, India's GDP estimates were downgraded even
more to negative figures, signalling a deep recession. (The ratings of over 30 countries have been
downgraded during this period.) On 26 May, CRISIL announced that this will perhaps be India's worst
recession since independence. State Bank of India research estimates a contraction of over 40% in the
GDP in Q1 FY21. The contraction will not be uniform, rather it will differ according to various parameters
such as state and sector.

Unemployment rose from 6.7% on 15 March to 26% on 19 April and then back down to pre-lockdown
levels by mid-June. During the lockdown, an estimated 14 crore (140 million) people lost employment
while salaries were cut for many others. More than 45% of households across the nation have reported
an income drop as compared to the previous year. The Indian economy was expected to lose over
₹32,000 crore (US$4.5 billion) every day during the first 21-days of complete lockdown, which was
declared following the coronavirus outbreak. Under complete lockdown, less than a quarter of India's
$2.8 trillion economic movement was functional. Up to 53% of businesses in the country were projected
to be significantly affected. Supply chains have been put under stress with the lockdown restrictions in
place; initially, there was a lack of clarity in streamlining what an "essential" is and what is not. Those in
the informal sectors and daily wage groups have been at the most risk. A large number of farmers
around the country who grow perishables also faced uncertainty.

Major companies in India such as Larsen & Toubro, Bharat Forge, UltraTech Cement, Grasim Industries,
Aditya Birla Group, BHEL and Tata Motors have temporarily suspended or significantly reduced
operations. Young startups have been impacted as funding has fallen. Fast-moving consumer goods
companies in the country have significantly reduced operations and are focusing on essentials. Stock
markets in India posted their worst loses in history on 23 March 2020. However, on 25 March, one day
after a complete 21-day lockdown was announced by the Prime Minister, SENSEX and NIFTY posted
their biggest gains in 11 years.

The Government of India announced a variety of measures to tackle the situation, from food security
and extra funds for healthcare and for the states, to sector related incentives and tax deadline
extensions. On 26 March a number of economic relief measures for the poor were announced totaling
over ₹170,000 crore (US$24 billion). The next day the Reserve Bank of India also announced a number of
measures which would make available ₹374,000 crore (US$52 billion) to the country's financial system.
The World Bank and Asian Development Bank approved support to India to tackle the coronavirus
pandemic.
The different phases of India's lockdown upto the "first unlock" on 1 June had varying degrees of the
opening of the economy. On 17 April, the RBI Governor announced more measures to counter the
economic impact of the pandemic including ₹50,000 crore (US$7.0 billion) special finance to NABARD,
SIDBI, and NHB.[16] On 18 April, to protect Indian companies during the pandemic, the government
changed India's foreign direct investment policy. The Department of Military Affairs put on hold all
capital acquisitions for the beginning of the financial year. The Chief of Defence Staff has announced
that India should minimize costly defense imports and give a chance to domestic production; also
making sure not to "misrepresent operational requirements".

On 12 May the Prime Minister announced an overall economic package worth ₹20 lakh crore (US$280
billion),10% of India's GDP, with emphasis on India as a self-reliant nation. During the next five days the
Finance Minister announced the details of the economic package. Two days later the Cabinet cleared a
number of proposals in the economic package including a free food grains package. By 2 July 2020, a
number of economic indicators showed signs of rebound and recovery.
Brief description of the different sectors of
an economy
The three main sectors of the economy are:

1. Primary sector
2. Secondary / manufacturing sector
3. Service / ‘tertiary’ sector

Primary sector- resource extraction, mining, farming, fishing

The primary sector is sometimes known as the extraction sector – because it involves taking raw
materials. These can be renewable resources, such as fish, wool and wind power. Or it can be the
use of non-renewable resources, such as oil extraction, mining for coal.

Secondary sector- the secondary sector makes and distributes finished goods.

The manufacturing industry takes raw materials and combines them to produce a higher value
added finished product. For example, raw sheep wool can be spun to form a better quality wool.
This wool can then be threaded and knitted to produce a jumper that can be worn.

Manufacturing – e.,g producing cars from aluminium.

Construction – building homes, factories

Utilities – providing goods like electricity, gas and telephones to households

The tertiary industry- services

The tertiary industry is the segment of the economy that provides services to its consumers,
including a wide range of businesses such as financial institutions, schools and restaurants. It is
also known as the tertiary sector or service industry/sector. The tertiary industry is one of three
industry types in a developed economy, the other two being the primary, or raw materials, and
secondary, or goods production, industries. As an economy becomes more developed, it shifts its
focus from primary to secondary and tertiary industries.

Ex. Logistics, hospitality, etc.

Impact on primary sector (agriculture and
supply chains)
Among agriculture and supply chains in India, supply chain was most affected by Covid-19 in India.
An article from Entrepreneur Magazine says how bad is the effect of Covid-19 on supply chains.

As per a March survey conducted by the Institute For Supply Chain Management, nearly 75 per
cent of companies reported supply chain disruptions in one form or the other due to coronavirus-
related transportation restrictions, and the figure is expected to rise further over the next few
weeks. Other interesting figures that emerged from the survey included the lack of any semblance
of a contingency plan for almost half the companies in case of a supply chain disruption leading
back to China, and well over 50 per cent of the companies also reported experiencing sudden,
unexpected delays in receiving orders, a problem compounded by supply chain information
blackout from China.

The figures above serve to bring out the vulnerable state of global supply chains, the lifeblood of
our towering economies in sharp relief. However, the writing had been on the wall for quite some
time. Consolidation of suppliers by geos, where efficiency has historically been the key strategy
driver and limited focus on de-risking procurement and supply chains over the last several years,
has contributed to the current state of affairs with shortages of key items globally, barely three
months into COVID-19—bringing into question the very foundations of the ‘ultra-globalized’
economies that we see around us and live within today.

Many private players in India also had requested to change regulations on transport for smooth
supply chains.

Following the lockdown as certain essential supply chains broke down, Britannia Industries,
supporting the lockdown, urged the government to ensure inter-state movement of the raw
material for the food processing industry was not hampered. The Managing director of Britannia
stated that "if even one link in the supply chain is broken, the country could run out of stocks of
packaged food in the next 7-10 days." Although inter-state travel has been banned, it doesn't
apply to essentials, and in places like Maharashtra the state police are yet to streamline the
process, disrupting supply chains.
Speaking of agriculture many farmers were unable to harvest their crops. Articles from
International Labour Organisation and Economic Times say how agricultural sector was affected.

Every year, Indian farmers face risks such as low rainfall, price volatility and rising debts. But risks from
the COVID-19 pandemic are putting new challenges in front of a sector that is already under threat.

The nationwide lockdown came at an unfortunate time for farmers, as it was the harvest season for the
rabi (winter) crop. The lockdown created both a shortage of labour and equipment - migrant labourers
in India usually move to rural areas during harvest, and smallholder farmers often rent harvesting
equipment as this is cheaper than purchasing it.

Consequently, farmers have not been able to harvest their bumper crops of cereal and oilseed harvest
this season. In some places the crops have been abandoned, while in others the harvest is coming more
than a month late, in hand with limited and more expense labour.

In addition, it was estimated that although India’s food bank had more than three times the minimum
operational buffer in stock, supply and access is a critical issue. Long supply chains have been severely
affected, especially at the beginning of the lockdown when transport was restricted. Drivers abandoned
trucks full of produce in the middle of interstate highways. Markets eventually started running short of
supplies, owing to food rotting in transit or never making it to point of sale.

In the first few days of the lockdown, consumers resorted to panic buying and hoarding essentials such
as flour, rice, sugar and oil. Prices of sugar rose in cities where supplies were limited and fell in other
places due to over-supply. Gradually, with logistical restrictions, markets fell short of supplies and the
prices of these commodities increased. But the farmgate prices of fruit, vegetables, milk, meat and
poultry in India have crashed because of lower demand.

Another issue that is cause for concern is the availability and access to seeds, fertilizers and pesticides
for the next crop season. Post the rabi harvest in April, farmers prepare for the next (kharif) season in
May. However, the COVID-19 induced disruptions have reduced production capacity for farm inputs and
have led to an increase in price, making these resources inaccessible to smallholder and marginal
farmers in the country.

While large landholding farmers and businesses may be able to weather these shocks, they put
enormous pressure on smallholders who work with limited resources and income. Resuming business
operations will be key to ensuring harvest security in the coming season.

A study during the first two weeks of May by the Public Health Foundation of India, Harvard T H Chan
School of Public Health and the Centre for Sustainable Agriculture found that "10% of farmers could not
harvest their crop in the past month and 60% of those who did harvest reported a yield loss" and that a
majority of farmers are facing difficulty for the next season. 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
see a yearly drop up to 8% as a result. In March 2020, tea exports from India fell 33% in March as
compared to March 2019. During the lockdown, food wastage increased due to affected supply chains,
affecting small farmers.
From 20 April, under new lockdown guidelines to reopen the economy and relax the lockdown,
agricultural businesses such as dairy, tea, coffee, and rubber plantations, as well as associated shops and
industries, reopened. By the end of April, ₹17,986 crore (US$2.5 billion) had been transferred to farmers
under the PM-KISAN scheme. Odisha passed new laws promoting contract farming. PM-KISAN scheme is
said to have been beneficial to the farmers.
Impact on secondary sector
(Industries, consumer durables, electronics,
automobile industries)
Coronavirus had a big impact on the manufacturing industry. The study on the impact of COVID-19 on
the global manufacturing industry is classified into automobile, food & beverage, chemical, machinery,
electrical and electronics, metal, aviation, pharmaceutical and medical equipment, and others. 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 temporarily suspended or
significantly reduced operations in a number of manufacturing facilities and factories across the
country. iPhone producing companies in India also suspended a majority of operations. Nearly all two-
wheeler and four-wheeler companies put a stop to production till further notice. Many companies have
decided to remain closed till at least 31 March such as Cummins which has temporarily shut its offices
across Maharashtra. Hindustan Unilever, ITC and Dabur India shut manufacturing facilities except for
factories producing essentials. Foxconn and Wistron Corp, iPhone producers, suspended production
following the 21 day lockdown orders.

The electronics industry is being significantly affected due to the COVID-19 epidemic, as China accounts
for nearly 85% of the total value of components utilized in smartphones and nearly 75% in the case of
televisions. All critical components, such as printed circuit boards, mobile displays, LED chips, memory,
open cell TV panels, and capacitors are imported from China. Most of the Chinese factories were shut
down due to the coronavirus pandemic. As a result, in January 2020, Chinese vendors have increased
component prices by nearly 2-3% owing to shortage of supplies due to factory shutdown. Therefore, it
has negatively affected the electronics manufacturing sector across the globe.

The impact on automobile industry would depend on the extent of their business with China. The
shutdown in China has prohibited import of various components affecting both Indian auto
manufacturers and auto component industry. However, current levels of inventory seem to be sufficient
for the Indian industry. In case the shutdown in China persists, it is expected to result in an 8-10 per cent
contraction in Indian auto manufacturing in 2020. However, for the fledgling EV industry, the impact of
coronavirus may be greater. China is dominant in the battery supply chain, as it accounts for around
three-quarters of battery manufacturing capacity.

Advent of global pandemic, COVID-19 has resulted in creating a global crisis in the FMCG industry.
Impacting over 195 countries across the global, the pandemic has already created economic backdrop
across the globe, thereby hinting for the next global recession. Strong initiatives are undertaken by
different governments for containing the outbreak. However, social distancing has made a drastic
negatively impact on the FMCG industry. Logistic issues, lack of adequate labors, operations limiting to
production of only essential items etc. are some of the few examples most FMCG companies are facing
across the globe.

Food & beverage industry has also not been spared by the impacts of COVID-19. For instance,
companies involved in manufacturing of processed food and non-perishable has seen robust increase in
sales owing to the lack of availability of fresh fruits and vegetables. However, restaurants and retail food
establishments are facing challenges owing to shortage of food supplies, employees and stringent
government lockdowns. Additionally, demand for organic and natural ingredient infused food products
are increasing at an exponential growth rate. For instance, Nourish Organic Foods Pvt Ltd., an India
based organic food supplier, specialized in selling of organic, gluten-free and vegan food items has
experienced 30% sales growth during February-March 2020

Demand for cosmetic & color products, amid the COVID-19 outbreak is anticipated to see a steep
downfall. Apart from those products that are deemed to be essential during such crisis, other non-
essential products are anticipated to cater huge loss in later half of the year. For example, post Covid-19
outbreak, U.S. consumers are changing their buying behaviors with 27.5% saying that the outbreak has
resulted in limiting itself and avoiding public gatherings, thereby resulting in steep decline in demand for
cosmetic products. On the other hand, demand for personal hygiene products such as hand sanitizers
and hand washes is growing at an exponential rate across the globe.
Impact on service sector-Tourism & Aviation,
Hospitality, Information technology (IT)
India's enormous services industry endured another month of devastating contraction in May as the
coronavirus brought activity to a near halt, causing steep job losses and cementing fears of a deep
recession, a survey showed on June 3.

Although the Nikkei/IHS Markit Services Purchasing Managers' Index crawled up to 12.6 in May from
April's all-time low of 5.4 it remained a long way from the 50-mark separating growth from contraction.
It was just below 50 in March.

The worse is yet to come as nationwide store closures and prohibition

to leave the house will weigh heavily on the services economy, says
economist Joe Hayes of IHS Markit

The COVID-19 pandemic has had a significant impact on the aviation industry due to travel
restrictions and a slump in demand among travellers.

Significant reductions in passenger numbers have resulted in flights being cancelled or planes flying
empty between airports, which in turn massively reduced revenues for airlines and forced many airlines
to lay off employees or declare bankruptcy. Some have attempted to avoid refunding cancelled trips in
order to diminish their losses. Airliner manufacturers and airport operators have also laid off employees.
According to some commentators,[1] the ensuing crisis is the worst ever encountered in the history of
the aviation industry.

 IATA estimates that global airlines need an emergency fund of up to US$ 200 billion as they fight
for survival
 According to the World Travel and Tourism Council, the COVID-19 pandemic could slash 50
million jobs worldwide in the travel and tourism industry, reflecting a 12-14% reduction in jobs
 International travel could be adversely impacted by up to 25% this year, equivalent to a loss of
three months of travel
 The industry could take up to 10 months to recover after the outbreak is over.
COVID-19 & Impact on the Indian Hotels Sector have been drastic. The hospitality industry was booming
in India in 2019 and no one has imagined it to become one of the worst affected sector.

The Indian hospitality industry is undoubtedly one of the biggest casualties of the COVID-19 outbreak as
demand has declined to an all-time low. Global travel advisories, suspension of Visas, the imposition of
Section-144 (prohibition against mass gatherings), India like most other countries is on lockdown, the
ramifications of which are unprecedented.

The hotels and hospitality sector in India has declined sharply in the first quarter of 2020, as the COVID-
19 outbreak impacts various segments of the sector, according to global real estate consultant JLL.
Coming off a high performance base in 2019, the COVID-19 outbreak and the containment measures
introduced by the government have resulted in a severe drop in foreign and domestic travel, across
both the tourism and business traveller segments, the report 'India Hospitality Industry Review 2019'
has said.

"In the third week of March 2020, at an all-India level, the hotels sector witnessed a decline of more
than 65 per cent in occupancy levels as compared to the same period of the previous year," it added.

As travel restrictions around the world intensified further, second and third quarters of 2020 are likely
to be similarly impacted, it added.

At least 30 per cent of hotel and hospitality industry revenue could be impacted if situation doesn't
improve by the end of June 2020. With more than 60 per cent of organised hotels in India already shut
and several others operational with single digit occupancies, a recovery will be gradual, the report said.

Industry estimates indicate that in India, branded and organised hotels annual revenue is Rs 38,000
crore, it added.
The extended Lunar New Year holidays in China have adversely impacted the revenue and growth of
domestic IT companies, operating out of China. IT companies are heavily dependent on manpower and
are not able to operate due to restriction in movement of people arising from lockdown and quarantine
issues. Consequently, they are not able to complete or deliver the existing projects in time and are also
declining new projects. Further, the global customers for Indian IT companies in China have started
looking for other service providers in alternate locations such as Malaysia, Vietnam, etc.
Impact on Trade (overall export and import)
There was both decline in import and export. There was more import than export which caused trade
deficit. Which lead to less foreign exchange. India’s exports plunged by a record 34.57 per cent in
March due to a steep decline in shipments of leather, gems and jewellery and petroleum products,
dragging the total exports in 2019-20 down to USD 314.31 billion, official data showed on
Wednesday. Merchandise exports in March stood at USD 21.41 billion, down by 34.57 per cent
compared to USD 32.72 billion in the same month last year. This is expected to be the steepest fall in
monthly exports since 2008-09, when shipments dipped by 33.3 per cent in March 2009. Imports too
contracted by 28.72 per cent to USD 31.16 billion.

This is the steepest decline since November 2015, when imports declined by 30.26 per cent. Dip in
exports and imports narrowed the trade deficit — the difference between imports and exports — in
March to USD 9.76 billion, the lowest in the last 13 months. It was USD 9.6 billion in February last
year. Oil and gold imports contracted by 15 per cent and 62.64 per cent to USD 10 billion and USD 1.22
billion, respectively in March 2019.

For the full fiscal (2019-20), imports declined by 9.12 per cent to USD 467.19 billion, narrowing the trade
deficit to USD 152.88 billion as against USD 184 billion in 2018-19. “The decline in exports has been
mainly due to the ongoing global slowdown, which got aggravated due to the current Covid-19 crisis.
The latter resulted in large scale disruptions in supply chains and demand resulting in cancellation of
orders,” the commerce ministry said in a statement.

Commenting on the data, Federation of Indian Export Organisations (FIEO) President Sharad Kumar
Saraf said that the trade data is on the expected lines as exporters were not able to ship goods during
the second half of March due to the lockdown, cancellations and delay of shipments and
orders. “Spread of Covid-19 across the globe has not only pulled down the world sentiment to its lowest
but has also affected the global supply chain and brought economies in recessionary condition,” he
said. During the first quarter of 2020-21, the sector will see a similar trend, he added.

However, he hoped that from the second quarter of this fiscal, exports may start showing nominal
growth depending on the condition evolving in the international market. He added that 29 out of the 30
major product groups were in negative territory during March except for iron-ore.

During the full fiscal, the sectors which recorded negative growth include petroleum (8.10 per cent),
handicrafts (2.36 per cent), cotton yarn/fabrics (10.67 per cent), engineering (5.87 per cent), gems and
jewellery (11 per cent) and leather (9.64 per cent). Tea, coffee, rice, tobacco and cashew sectors too
recorded negative growth in 2019-20.
Since 2011-12, India’s exports have been hovering at around USD 300 billion. During 2017-18, the
overseas shipments grew by about 10 per cent to USD 303 billion and further to USD 330.08 billion in
2018-19.

The dip in numbers are in sync with the projections of the World Trade Organisation (WTO), which has
stated that world trade is expected to fall between 13 per cent and 32 per cent in 2020 as the COVID 19
pandemic disrupts normal economic activity and life around the world.
Import sectors which registered negative growth during 2019-20 include gold, silver, electronic goods,
transport equipment, machine tools, iron and steel, coal, petroleum and chemicals. Data showed that
oil imports in April-March 2019-20 dipped by 8.15 per cent to USD 129.43 billion, while non-oil imports
were down by 9.49 per cent to USD 337.76 billion during that fiscal. According to the RBI data, services
exports in February were USD 17.73 billion, registering a positive growth of 6.88 per cent. Imports were
USD 11.07 billion, an increase of 12.82 per cent.
Impact of Covid-19 on the U.S. Economy
As the novel coronavirus (COVID-19) rips through America’s biggest cities, its effect is being felt far
beyond the over 140,000 Americans who are confirmed infected. The quarantines and lockdowns that
are needed to fight the virus’s spread are freezing the economy, too, with unprecedented force and
speed. The stock market has sunk a quarter from its peak last month, wiping out three years of gains.
Last week, meanwhile, brought news that a record 3.28 million Americans applied for unemployment
benefits, the highest number ever recorded. Unemployment is shooting up far faster than it did during
the 2008 recession, a sign the economy is headed toward recession.

To understand COVID-19’s hit on the economy, consider its effect on different industries. Consumption
makes up 70% of America’s gross domestic product (GDP), but consumption has slumped as businesses
close and as households hold off on major purchases as they worry about their finances and their jobs.
Investment makes up 20% of GDP, but businesses are putting off investment as they wait for clarity on
the full cost of COVID-19. Arts, entertainment, recreation, and restaurants constitute 4.2% of GDP. With
restaurants and movie theaters closed, this figure will now be closer to zero until the quarantines are
lifted. Manufacturing makes up 11% of U.S. GDP, but much of this will be disrupted, too, because global
supply chains have been obstructed by factory closures and because companies are shutting down
factories in anticipation of reduced demand. Ford and GM, for example, have announced temporary
closures of car factories.

As businesses rack up losses due to closures, layoffs have already followed. Small businesses will
especially struggle to keep staff on the payroll as their revenue slumps. Countries such as Germany are
taking steps to help businesses avoid layoffs, and the United States would be wise to do so as well. The
U.S. Congress has passed a massive stimulus bill that provides for hundreds of billions in new spending,
expanding unemployment insurance and providing a cash handout to low and middle-income
Americans, which should help laid off workers make ends meet until the economy begins to recover.
The legislation also provides for $350 billion in “loans” for businesses, targeted at firms with fewer than
500 employees. These loans will be forgiven if firms don’t cut wages or lay off employees—so they
function de facto like grants to businesses.

Like India Unemployment has also risen in the U.S. drastically. In the United States, the proportion of
people out of work has hit 10.4%, according to the International Monetary Fund (IMF), signalling an end
to a decade of expansion for one of the world's largest economies. Millions of workers have also been
put on government-supported job retention schemes as parts of the economy, such as tourism or
hospitality, came to a standstill under lockdown. However, the data differs between countries. France,
Germany and Italy provide figures on applications, for example, whereas the UK counts workers
currently enrolled in the scheme.
Both Indian and U.S. Airline Industry faced huge losses and were amongst the hardest hit sector. The
travel industry has been badly damaged, with airlines cutting flights and customers cancelling business
trips and holidays. Many countries introduced travel restrictions to try to contain the virus. Data from
the flight tracking service Flight Radar 24 shows that the number of flights globally took a huge hit in
2020.

The US and Eurozone’s economies could take until 2023 to recover from the impact of the COVID-19
coronavirus crisis, according to a new report from consultancy McKinsey & Company. If the public health
response, including social distancing and lockdown measures, is initially successful but fails to prevent a
resurgence in the virus, the world will experience a “muted” economic recovery, says McKinsey. In this
scenario, while the global economy would recover to pre-crisis levels by the third quarter of 2022, the
US economy would need until the first quarter of 2023 and Europe until the third quarter of the same
year. If the public health response is stronger and more successful - controlling the spread of the virus in
each country within two-to-three months - the outlook could be more positive, with economic recovery
by the third quarter of 2020 for the US, the fourth quarter of 2020 for China and the first quarter of
2021 for the Eurozone. The industries hardest hit by COVID-19, including commercial aerospace, travel
and insurance, may see a slower recovery. Within the travel sector, the shock to immediate demand is
estimated to be five-to-six times greater than following the terror attacks of 11 September 2001 -
though recovery may be quicker for domestic travel. The crisis has also amplified existing challenges or
vulnerabilities in the aerospace and automotive industries, which will affect their recovery rates.
Conclusion
As the lockdowns eased, the US economy appears to have staged a sharp recovery — almost looking like
the alphabet “V”. The question is: Will India also stage a similar V-shaped recovery? After all, the
process of “unlocking” has already started. Or will it follow some other letters like “Z” or “U” or “L”?
Before taking a stab at the answer, it is important to understand the factors that determine the shape of
recovery. These include the overall duration of the pandemic, the effect on jobs and household
incomes, the extent of fiscal stimulus provided by the government etc.

Most economists are unanimous that in the current financial year, India’s economy will contract. The
difference of opinion is only about the extent of this contraction. The range varies between minus 4% to
minus 14%. Many economists are of the opinion that after hitting rock bottom this year, the economy
will start its recovery in the next financial year (2021-22).

But according to a detailed analysis by Pronab Sen, former Chief Statistician of India, that was published
in Ideas for India over the weekend, India’s economy will contract not just this year but also in 2021-22.

The Table shows how India’s absolute GDP (in Rs Trillion, which is the same as Rs Lakh Crore) is likely to
struggle to even come back to the 2019-20 level by 2023-24, which is the last year of this government’s
current term.

The Table also provides a snapshot of the likely trend level of GDP had India grown at 6% and 8%
respectively over the same period.

“As things stand, and the government retains the 2020-21 expenditure budget for 2021-22 as well, it is
likely that 2021-22 will witness a GDP growth rate of -8.8%. This is a frightening thought since it means
that the country could experience a full-blown depression – the first in our history as an independent
nation,” writes Sen in his analysis.
As the last graph shows, given the weakness of the economy going into the Covid crisis as well as the
less than adequate fiscal stimulus, India is likely to end up with an “elongated U-shape” recovery.
 BIBLIOGRAPHY
The information for this project
was taken from various websites
using the Google search engine.
Few of the websites are:
 www.wikipedia.com
 www.bbc.com
 www.fpri.org

 www.ilo.com
 www.who.int