Effect of Covid-19 on Indian Economy

By Paramjit Singh
MBA Banking and Financial Engineering, Chandigarh University
Abstract
The advent of COVID-19 has disrupted social and economic life. In this study the focus is on
impact assessment on affected sectors, such as aviation, tourism, retail, major markets, MSMEs,
and oil. In order to 'be made in India', some changes are needed, workers' changes are one of them
.growth, production, trade and the small, medium and micro enterprise sector, and outstanding
important policy measures to control the potential collapse of the economy. The impact of the
epidemic on the other side different categories and conditions for complete, extended and partial
locks, and at different levels power consumption is huge in the Indian economy. The Indian
economy can barely manage to own it a positive growth of 0. 5 percent in the optimistic situation
but also with a chance of 3-7 percent negative growth of hundreds of percent in the worst cases of
the 2020 calendar year. The effect becomes sour on trade, manufacturing and MSME sectors. The
potential impact of COVID-19 from the positive The worst case scenario is the manufacturing
sector could shrink from 5.
Introduction
The impact of the coronavirus epidemic in India has been devastating in terms of economic activity
and loss of human life. Almost all sectors have been badly affected as domestic demand and
exports have fallen sharply except for a significant increase in high growth. An effort is being
made to analyze the impact and possible solutions for certain key sectors.
Food & Agriculture
As agriculture is the backbone of the country and part of the government has declared an important
sector, the impact is likely to be low on early agricultural products and the use of agricultural
inputs. Several world governments have already approved the free movement of fruits, vegetables,
milk, etc. Online food platforms have been severely affected due to vague restrictions on the
measures that will benefit the industry and workers in the short term. Protecting rural food
production in the coming weeks will hold a major response to the significant impact of COVID-
19 on the Indian food sector and the macro-economy.
Ways And Tourism
The contribution of the Aviation and Tourism Sector to our GDP stands at about 2.4% and 9.2%
respectively. The Tourism Sector employs approximately 43 million people in FY 18-19. Aviation
and Tourism were the first industries hit hard by the epidemic. The general consensus seems to be
that COVID will hit these industries more than 9/11 and the 2008 Financial Crisis. The two
industries have been facing severe cash flow problems since the epidemic began and are targeting
an estimated 38 million off-office, which translates to 70 percent of the total workforce. The impact
will fall on both white and blue works. According to IATO estimates, these industries could lose
as much as 85 billion rupees due to travel restrictions. The epidemic also brought a wave of
innovation in the areas of intangible travel and travel technology.
Telecom
There have been many changes in the Indian telecommunications sector even before COVID 19
due to short price wars between service providers. Many of the key services and sectors continued
to operate during the epidemic thanks to the implementation of 'home-based work' due to
limitations. With more than 1 billion connections since 2019, the telecommunications sector
contributes about 6.5 percent of GDP and employs nearly 4 million people. Increased broadband
use has had a direct impact and led to pressure on the network. Demand increased by about 10%.
However, Telco is preparing for a sharp decline in adding new subscribers. As a policy
recommendation, the government can assist the sector by relaxing compliance and providing for
the suspension of spectrum fees, which can be used to expand the network by companies.
Medicine
The pharmaceutical industry has been booming since the outbreak of the Covid-19 epidemic,
particularly in India, which produces the largest generic drug in the world. With a market size of
$ 55 billion during early 2020, it has been rising in India, exporting Hydroxychloroquine to the
world, esp. in the US, UK, Canada, and the Middle East. There has been an increase in the prices
of imported raw materials from China as a result of the epidemic. Ordinary medicines are the most
affected due to over-reliance on imports, disrupted sales of goods, and unavailability of workers
in the industry, resulting in social exclusion. At the same time, the pharmaceutical industry is
struggling due to government restrictions on the sale of critical drugs, equipment, and PPE kits to
ensure a sufficient amount of land. The increase in demand for these drugs, coupled with the impact
of accessibility makes things more difficult. Reducing financial pressure on pharmaceutical
companies, reducing taxes, and dealing with staff shortages can be divisive in such a time.
Oil & Gas
The Indian Oil and Gas industry is very important in the global context - it is the third largest
consumer of energy behind the USA and China alone and contributes to 5.2% of global fuel
demand. Total national closures have slowed down fuel demand (including 2/3 of oil and gas
demand) as car and industrial production declined and passenger and passenger goods (both in
bulk and in person) have declined. Although the inflation rate has declined during this period, the
government has raised taxes and special taxes on income loss, in addition, and inflation has also
risen. As a policy recommendation, the government may consider transferring the benefits of crude
prices to eliminate consumers in retail stores to promote demand.
Except Covid-19: Normal New
Given the extent of the disruption caused by the epidemic, it is clear that the current downturn is
very different from the recession. A sudden decrease in demand and an increase in unemployment
will change the business environment. Adopting new policies such as ‘transition to localization,
savings, purchasing power and innovation’ will help businesses embark on a new path in this
uncertain area.
Literature Review
 By Pravakar Sahoo and Ashwani The study aims to conduct a test of COVID-19 on the Indian
economy by analyzing its impact on growth, production, trade and the small, medium and
micro enterprise sector, and outstanding key policy measures to control the economic
downturn. The Indian economy can barely manage to own it a positive growth of 0.5 percent
in the optimistic situation but also with a chance of 3-7 percent negative growth of hundreds
of percent in the worst cases of the 2020 calendar year
 By Bindu Garg , Lokesh Jain & Sejal Kankriya The silver base of the Indian economy stems
from the sharp decline in crude oil prices from around the world. At the same time, dreams
like the $ 5 trillion economy no longer look like far-fetched. This text looks at stock the
potential impact of COVID-19 on the Indian economy in the short and long term.
 By M Govinda Rao The sharp decline in public finances over the past decade - as evidenced by
the dramatic increase in income, deficits and basic deficits, rising in their debt and dependence
debts, and depreciation of capital and repair costs - have been a critical issue concern for policy
makers. However, the country's currency itself performance has also seen a sharp
decline. There are major design problems in the scheme. Not sure if this program will work
though.
 By Dr. V. Kalaiselvi, This study focuses on globalization and its impact on the various sectors
of India. It simply spreads the idea of increasing growth as a way out in increasing the
process of self-sustaining material in the economy freedom and entrepreneurship promise a
high level of materialism to all who are open economics. Especially in the developing world,
the challenges are increasingly complex negotiation because it affects all sectors and levels
of society.
 By S. Mahendra Dev and Rajeswari Sengupta The outbreak of the Covid-19 epidemic is one
of the most shocking in Indian history. With a long nationwide closure, The global economic
downturn and the disruption associated with demand and supply chains, the economy it is
possible to cope with a slower pace of travel. In this paper we describe the state of the Indian
economy in the pre-Covid-19 era, explore the potential impact of shock on various parts of
economy, review the policies announced so far by the central government and the Reserve
Bank of India to revive the shocking economy and prioritize policy specific sector
recommendations.
Research Questions
 Impact on Tourism, Aviation and Retail
 Impact on GDP Growth Rate
 Impact of COVID-19 Pandemic on Migratory Labour
 Increase in rate of Unemployment in Covid-19
 Inflation rate in Covid-19
 Rate of Interest in Covid-19
 Industry output in terms of Manufacturing
 Which sectors have performed well in covid-19
 Packages launched by Government to tackle this situation

Research Gap
In the above studies the authors have explained the Indian economic situation correctly where our
economy is going downward and mentioned about different business sectors going downwards but
ignored some the sectors which have performed exceptonly well as compared in terms of operation
and profitability if we compare it before covid-19 and after covid-19 they also not mentioned about
the kind of economic packaged launched by our government to handle the situation to increase the
purchasing power of consumers and also about the plans which will make us self reliant towards
basic products and services.

Research Objectives
 To study the various sector of Indian Economy
 To assess the impact of Covid-19 on the development of Indian agriculture, industries, trade,
Labour and environment
 To revealed the impact of Covid-19 on Employment.
 To Know the counter measures taken by Government.
 To know which sector has performed well in Pandemic

Research Methodology
The current study relied on secondary data to conduct a COVID-19 impact on Indian economy.
Data sources are reports of National Account Statistics, publication of the service of statistics and
program implementation (MOSPI); Indian Economics Manual and Monthly Bulletin, Reserve
Bank of India; Export - Import Database, Ministry of Commerce, Government of Indian; and
annual reports (various issues), Department of Small and Medium Enterprises and some published
journals.

Impact on Tourism, Aviation and Retail

The tourism industry is the worst affected by the COVID crisis, worldwide. World Tourism The
United Nations (UNWTO) (2020) estimates show a 20-30 percent decline in international tourists
Incoming. These figures are also based on current conditions and may rise or fall the future.
Millions of industrialized people may lose their jobs. In India, travel once the tourism industry is
thriving and contributes significantly to the economy. FICCI-Yes Bank report entitled ‘India
Inbound Tourism: Unlocking the Opportunities’ Explained India as the home of the tourism
industry and the largest market in South Asia. India's tourism rate is 9.2 GDP percentage and
generated US $ 247.3 billion in 2018, with 26.7 million jobs created. Currently, it is the 8th largest
country in terms of contribution to GDP (Jagan Mohan, 2020).According to the report, by 2029,
the sector is expected to provide employment to an estimated 53 million people. Foreign Tourist
Arrivals (FTAs) exceeded 10 million in 2017. However, the coronavirus epidemic is limited
international mobility and revenue generated by the sector will take a huge toll on GDP growth
measure. It could bring a 0.45 percent decline in GDP growth rate. India's aviation industry
currently contributes US $ 72 billion to India's GDP. Arrival of foreign tourists has been low for
the first quarter. The lockdown key will have a big impact on the second arrival quarter. If we
estimate a 25 percent reduction in aviation sector contributions, it will happen up to 18 billion.
Trains contributed US $ 27.13 billion in 2019 to GDP. 21-day closing period will reduce revenues
by US $ 1.56 billion. India's retail industry was worth US $ 790 billion in FY 2019. It accounts for
more than 10 percent of national GDP and 8 percent employment. Over the past few years, online
marketing has seemed very fast market growth and speculation has shown a 30 percent growth in
online sales by 2020 (nationally Promotion and Investment Center, 2020). A month-long sale
closure will affect 2nd quarter fee. In the sales sector, press demands have a tendency to regenerate
very quickly and this will do enable the sector to recover losses once the work closure is removed.
Online marketing has been working in some areas of the country during the closure period and this
will help to eliminate some of the losses incurred by the industry.

Impact on GDP Growth Rate

While the COVID-19 epidemic is constantly growing and showing as little signs of exposure as
15 In April 2020, its negative impact on the country's economic growth is likely to be devastating.
The UN warned that the coronavirus epidemic is expected to have a devastating global impact
economy, and most importantly, India’s GDP growth in the current economy is expected to decline
4.8 percent (United Nations 2020). Similarly, the UN ‘Economic and Social Survey of Asia and
Pacific (ESCAP) 2020 reported that COVID-19 will have broader social and economic
consequences for a region with restrictive activities in the areas of tourism, trade and financial
communications (United Nations, 2020) The 2019-2020 Economic Survey provided preliminary
estimates of real GDP growth for 2019 2020 by 5.0 percent, as shown in Table 1, compared to the
growth rate of 6.8 percent in 2018-2019. Estimated GDP is estimated at `204,400 billion for 2019-
2020 with an increase of 7.5 percent over interim estimates of GDP (`190,100 billion) for 2018–
2019. (Economic Survey, 2020, p. 100) Opened 28 February 2020, the National Bureau of
Statistics announced revised estimates of GDP growth, from 8 percent to 7.1% in the first quarter,
from 7 percent to 6.2% in the second quarter and from 6.6 percent to 5.6 percent in the third quarter.
Goldman Sachs estimated GDP growth rate at 1.6 by percentage, it dropped by 400 basic points
due to a 21-day lock (Goldman Sachs, 2020). If it happens rapid withdrawal of COVID-19
epidemic worldwide in mid-May, KPMG India estimates India's GDP growth in the range of 5.3
percent to 5.7 percent. In the second case where India controls the virus spread but there is a
significant economic downturn in the world, growth can be between 4 and 4.5 percent. KPMG
India in its report estimates that India's GDP growth rate is below 3 percent as the virus spreads
further in India and locks are seeing an increase (KPMG, 2020). The Motilal Oswal study shows
that a One full day lock can shave 14-19 key points in annual growth (Oswal, 2020). Barclays
reported that the cost of closed closures is about US $ 120 billion, or 4 percent of GDP (Barclays,
2020). Mr Yashwant Sinha, India's former finance minister, has estimated the cost of 21 days locks
nationwide by 1 percent of GDP. The global economic downturn and uncertainty of the future
could make a 2 percent drop in growth rate (2020-2021) possible
Impact of COVID-19 Pandemic on Migratory Labour
The International Labor Organization in its report describes the coronavirus as ‘extremely severe
a global crisis since the Second World War ’. About 400 million people (76.2% of the total
workforce) work internally India's informal economy is at risk of falling into poverty as a result of
the catastrophic consequences of the virus. With half of the world closed, there will be a loss of
195 million full-time jobs or 6.7 percent working hours worldwide. Many are in low-paid, low-
skilled jobs where the sudden loss of income is a disaster (International Labor Organization, 2020).
Occasional migration of workers is a common occurrence in rural India. The migration of millions
of people occur from rural to industrial areas, urban markets and farms. Highways for migration
in India stretches from UP and Bihar, to Punjab, Haryana, Maharashtra and Gujarat. New corridors
left Odisha, West Bengal and Northeast to Karnataka and Andhra Pradesh, from Rajasthan to
Gujarat, from Gujarat MPs and Maharashtra and Tamil Nadu to Kerala are also under construction.
These are migrants workers in the construction industry (40 million), domestic workers (20
million), textiles (11 million), brickwork (10 million), transport, mining and agriculture (IIPI,
2001). In time closure, 92.5 percent of employees lost their jobs in 1 to 4 weeks. A study by Jan
Sahas, dated 3196 migrant workers from all over northern and central India, between 27 March
and 29 March, indicated that 80 per person One hundred migrant workers fear they will run out of
food before the end of their imprisonment on April 14 and will do so. They may not get their job
after that (Figure 1). Research has shown that 55 percent of immigrant workers receive daily wages
between 200 and 400, and 39 percent of workers earn between 400 and 600, which is below the
minimum wage. Only 4 percent of employees receive `600 or more, which is close at a lower salary
level. They work in exploitative situations, are often in debt and have low savings themselves.
About 49.2 percent of the workers in this study said they had no assignment anymore 39.4 percent
said they had a share that could last for about 2 weeks.

Figure 1

Source: Jan Saahas Survey (2020)

Increase in rate of Unemployment in Covid-19

Estimated 2020-2021
The past has shown a sudden explosion in level of inefficiency, as shown in Figure 2. The model
of deforested trees can be accepted considering three conditions of hopelessness: moderate,
moderate and severe. Limitations of the probability of these three conditions at this point while
(April 2020) can be considered as 0.33 each. The rising unemployment rates in all three cases can
be considered 2%, 6% and 12%, respectively, of moderate, moderate, and negative moods.
Considering these situations, their possibilities as well the expected result, emerges the structure
of the decision trees, as shown in Figure 3. Combining three EVs, 0.66%, 1.98% and 3.96%, the an
expected increase in the unemployment rate forecast 2020-2021 is 6.60%. Adding this to the
current level of unemployment of 13.53%, comes India's average unemployment rate for 2020-
2021 to 13.53% + 6.60% = 20.13%. So, there are all possibilities that the unemployment rate for
2020-2021 could fall by 20%.
 Figure 2

Source: Unemploymentinindia.cmie.com, 2020.

Figure 3

Inflation rate in Covid-19

Estimated 2020-2021

The latest trends in inflation are given in Figure 4.

Three factors may be involved in short-term inflation time. These are the following:
• Decreased crude oil prices
• Decreased demand after COVID-19 pandemic
• Government efforts to ensure service delivery are important things
Till date, the government has not passed buyers any reduction in oil prices. Petrol and diesel
keep selling at old prices. This is something in the government is holding its hand, which can
be used to prevent it inflation when it exceeds reasonable limits. Continue the search itself has
 taken a heavy hit and is expected to keep low check prices. At the same time, the government
has done it brutally introduced essential food supplies by estimation and other sources, which
is also possible keeping inflation checked. As the stock of goods finds we are tired, the
government will allow the selected production adequate implementation centers using
adequate safety measures. All these steps together are possible keep inflation for the year 2020-
2021 under a certain check. The average inflation rate for the year 2020-2021 is non-existent
may exceed 5-6%.

Figure 4
Source: MOSPI (2020).

Rate of Interest in Covid-19

Estimated 2020-2021
At its meeting on March 27, 2020, the RBI (2020) took over other bold steps also announced a
reduction of the following levels:
• Repeat repo rate: Cut by 90 points you take up to 4%
• Interest rate: Cut by 75 basic points to reduce 4.40%
• Standby building level: Cut by 75 points down 4.65%
In addition, the RBI also announced less disapproval ways to promote bank lending. The
prescribed fee the rate has been reduced to 3.00% from 4.00%. Continued RBI and authorizes a 3-
month suspension on loan payment, reducing pressure on borrowers. None it is very likely that the
interest rate will vary significantly from the current levels (as announced on 27 March 2020). They
can go down by continuing with another 100-200 basic points until 31 March 2021 to ensure
adequate funding available on the market. SBI base lending rate currently 10 March 2020 updated
to 8.15%. This is the end of the year 2020-2021 is expected to decline by another The basic score
is 100-200, given the fact that it is a continuation lending will be a priority. Therefore, effective
31 March 2021 The basic lending rate (SBI) can be estimated at 6.65% (8.15-1.50%).
 Figure 5
Industry output in terms of Manufacturing
In order to make an impact on the industry level, we rely on the data of the Annual Survey of
Industries (ASI) registered production firms. Here we take the values between the total additional
value of FY 2016, FY 2017 and FY 2018 as basic estimation values. We have salary costs and
fixed costs parts, namely. interest and rental costs in industry. First we count each loss status using
the value of the additional base value (NVA) for each category. We also calculate the cost part
(payment and fixed costs, assuming that these costs will remain with the company even if it does
not have Working between closures) and calculate the cost of each situation in each industry.
Here's what we have excluding two industries: food products and products. Add to NVA losses on
costs at the time of the closure of a particular situation, and thus calculating the total loss for each
sector. We then take the NVA intermediate FY 2014, 2015 and 2016 as the previous NVA base.
The presentation is made as follows:
1. Percentage reduction in NVA of all industries compared to the previous index period (FY 2014-
2017). Also, we consider NVA losses as a percentage of the total NVA total value (FY 2015-2018)
2. We subsequently find the formation of the NVA loss as a percentage of the total NVA total time
across state B-only industries.
3. Percentage reduction in NVA per industry compared to NVA baseline period after loss with
NVA stop time
Which sectors have performed well in covid-19
Indian Pharmaceutical Industry
India is the largest supplier of generic medicines in the world. The Indian sector provides more
than 50% of the global demand for various vaccines, 40% of the general demand in the US and
25% of all medicines in the UK. India enjoys an important position in the global pharmaceutical
industry. The country also has a large number of scientists and engineers who have the potential
to advance the industry. Currently, more than 80% of the world's antiretroviral drugs (Acquired
Immune Deficiency Syndrome) are supplied by Indian companies . The sector is expected to grow
to US $ 100 billion, and the medical equipment market is expected to grow by US $ 25 billion by
2025. The sale of includes bulk drugs, mediators, drug manufacturing, biologicals, Ayush and
herbal and surgical products. As of November 2020, India has exported US $ 15.86 billion to
FY21. Exports from India amounted to US $ 16.28 billion at FY20 and US $ 2.07 billion by
October 2020. India's biotechnology industry comprising biopharmaceuticals, bio-services, bio-
Agriculture, bio-industry, and and bioinformatics. The Indian biotechnology industry was valued
at US $ 64 billion by 2019 and is expected to reach US $ 150 billion by 2025. India's domestic
currency reaches Rs 1.4 lakh crore (US In 2019, a 9.8% increase from Rs 129,015 crore (US $
18.12 billion ) in 2018. Medical spending in India is expected to grow by 9 12% over the next five
years, making India one of the top 10 countries in terms of medical spending.

Figure 6
Source: ibef.org
Packages launched by Government to tackle this situation
Atmanirbhar Bharat, which translates as 'India's independence', is an Hindi term used by Indian
Prime Minister Narendra Modi and the Government of India in connection with economic
development in the country during and after the COVID-19 epidemic. In this context, the term is
used as an umbrella term for making India "the most important and important part of the global
economy", pursuing policies that are efficient, competitive and resilient, and self-sustaining and
self-sustaining. The term Modi has been using since 2014 in terms of national security, poverty
and digital India. of COVID-19 on May 12, 2020, 12 October and 12 November 2020. Since May
2020, the term has been applied to departments such as the Department of Consumer Affairs, Food
and Public Service, the Department of Education and the Department of Communications. Defense
in relation to media releases, statements and policies. This statement has been used by the Former
Planning Commission for India's Five-Year Plan. The observers have noted that India has been
formulating policies and building institutions that promote independence since the day it was
created. Private companies and their products are also considered to be good examples of
independence in India such as the Maruti 800 car, Thums Up, Amul, HDFC, India's leading IT
companies, and Barat Biotech and Serum Institute of India. Bharat Biotech developed India's first
COVID-19 vaccine on a bench trip for eight months.

Source: Capitalvia Global Research limited

Conclusion
The spiralling and growing epidemic of COVID-19 has turned the world's prosperous economy
into unexpected and incomprehensible words. But it showed a lot that the current decline is visible
it was in stark contrast to the economic downturn that had brought the country into economic
chaos. While nations, unions, corporations and many nations continue to understand the greatness
of epidemic, no doubt the need for an hour to prepare for a stable, orderly future it works better
with life and performance. While this unprecedented situation has caused great damage to the
economy, especially over time times of closure, the nation will have to go through it, by
introducing financial measures. As national government observes, protection for both life and
livelihood is needed. Economics the work should begin gradually after the staff assessment. Strong
prevention measures should be in place what the industry does to protect the health of workers.
While policy and reforms it must be sold by the government enough to save the economy, industry,
civil society and societies play an equal role in maintaining equality. Social isolation, avoiding or
canceling gatherings, as well as the use of masks and sanitisers should be a way of life until we
are able to eradicate the virus. At this time, the economy is dominated by the social behavior of
humanity, so the responsibility for restoring economic action is not limited to government. The
risk of a global recession due to COVID-19 by 2020 and 2021 could be very high, as it is it has
been observed worldwide that the closure of all economic activities - production, consumption and
trade - to control the spread of COVID-19 is imminent. The type of lock is different if possible
COVID-19 due to supply shock, demand shock and market shock. Economic stability depending
on the times and the extent of government support and the level of corporate debt as well how
companies and markets respond to low demand. Government assistance to those most in need
(especially built on informal sectors, immigrants and marginalized communities) is a critical step
to save many lives. However, every issue brings a unique opportunity to rethink the way designed
for personal, community and community development. The COVID-19 epidemic has a clear
message for the Indian economy to adopt sustainable development models, based on self-reliance,
inclusive and environmentally friendly structures.
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