IMPACT OF COVID

ABSTRACT –
The outbreak of COVID-19 labeled as a black swan event, causes significant damage
globally due to its fatality. The COVID-19 pandemic has expanded across the world by
creating shocks in almost all industries due to the restrictions, curfews, stay-home and work-
from-home policies, and quarantines. As a result of the health and economic crisis of the
COVID-19 pandemic, the economic sectors got severely affected.

INTRODUCTION-
We are in the middle of a global Covid-19 pandemic, which is inflicting two kinds of shocks
on countries: a health shock and an economic shock. According to the nature of the disease
which is highly contagious, the ways to prevent the spread include policy actions such as the
imposition of social distancing, self-isolation at home, closure of institutions, and public
facilities, restrictions on mobility, and even lock-down of an entire country.
In the past, India has had to deal with diseases such as smallpox and polio which have been
pretty severe episodes. However, the Covid-19 which originated in China in December 2019
and over the next few months rapidly spread to almost all countries of the world can
potentially turn out to be the biggest health crisis in our history.
India recorded the first case of the disease on January 30, 2020. Since, then the cases have
increased steadily and significantly and have recorded the third highest Covid-19 caseload in
the world after the United States and Russia with more than a million confirmed cases and
more than 25,000 deaths on July 2nd week 2020.
In order to curb the spread of the virus, the government of India announced a nationwide
lock-down starting in March 25, 2020 which continued for about two months. All non-
essential services and businesses, including retail establishments, educational institutions,
places of religious worship, across the country stayed closed during this period and all
means of travel were stopped.
The unprecedented lock-down has had a significant adverse effect on the economy. Millions
of jobs and livelihoods are now at stake. As activity around the country came to a halt, with
no job or income, more than 50 million migrant workers either returned to their native
villages or shifted to camps inside the cities because state borders were sealed.
Transportation of raw materials and finished goods across states was also severely
constrained. Countries have closed national borders bringing international trade and
commerce to an abrupt halt. All these are severely disrupting supply mechanisms and
distribution chains in almost all sectors.
At the same time, there has been a complete collapse of consumption demand as millions of
people stay home and postpone their non-essential expenditures.
This crisis comes at a time when India's GDP growth was slowing down, and unemployment
was on the rise owing to poor economic performance over the last several years.
 METHODOLOGY-
IMPACT OF COVID ON INDUSTRIAL SECTORS:
The coronavirus (COVID-19) pandemic is having a clear impact on the supply chains of
virtually all manufacturers. Whether frozen foods and grocery items or emergency item,
or even the services the supply chain has been facing multiple obstacles.
There are mainly five essential barriers of supply chain such as lack of man power, local
laws enforcement, lack of transportation, scarcity of raw materials and deficiency in
cash flow for Indian manufacturing sectors during lockdown.
In order to find the impact at industry level, we rely on Annual Survey of Industries (ASI)
data for registered manufacturing firms. Here we take the average values of net value
added for FY 2016, FY 2017 and FY 2018 as base values for estimation.
First, we compute the loss for each scenario using the base net value added (NVA) of each
industry. we also compute the cost component (wages as well as fixed cost, assuming these
costs to remain with the firm even if without operation amid lockdown) and calculate the
cost for each scenario for each industry.
Here we have excluded two industries: food products and the pharmaceutical products. We
add on the loss of NVA to the cost during lockdown for a particular scenario, and thereby
compute the total loss for each industry.
Then we take the average NVA of FY 2014, 2015 and 2016 as the previous base of NVA.
Presentation is made as follows:
Percentage decline in NVA of all industries as compared to previous benchmark period (FY
2014–2017). Also, we take the NVA loss as per cent of total NVA of base value (FY 2015–
2018).
Then we find the composition of NVA loss as per cent of total NVA of base period across
industries for scenario B only.

Percentage decline in the NVA of each industry while comparing the base period NVA after
loss with the NVA of benchmark period.

The study on the impact of COVID-19 on the global sectors are classified into primary,
secondary and service sector. Here we are going to discuss sectors and services with
reference to COVID-19.
1.TOURISM INDUSTRY- Travel and Tourism is one of the critical sectors in the global economy,
which accounted for US$ 2.9 trillion to GDP in 2019; this is the highest contribution by sector to
the GDP, 29% of service exports, and 300 million jobs worldwide (Gamage et al. 2020; UNWTO,
2020). The tourism sector has the highest economic contribution in developing (Gamage et al.
2018) and developed countries and is one of the fastest-growing economic sectors worldwide;
in 2018, 1.4 billion international tourist arrivals worldwide have been identified.
The travel and tourism sector are one of the most affected sectors in the economy due to the
COVID-19 pandemic (Shretta, 2020). Due to the health and economic crisis caused by the
pandemic, the tourism sector is affected on a large scale. The UNWTO has estimated a loss of
approximately 1.1 billion international tourist arrivals, with a loss of US$ 910 billion to US$ 1.1
trillion export revenues and 100-120 million jobs due to the wider spread of the novel
coronavirus.

Tourism is one of the most important sectors in the global economy, significantly
contributing to the world’s GDP (Gamage et al., 2017). The term tourism can be defined as a,
social, cultural, and economic phenomenon that causes movement of people to the country,
outside destination, or environment, for personal, business purposes. The tourism
sector is a major source of employment globally, which is a labour-intensive industry. The
supporting industries of tourism are accommodation, transportation, food and beverages,
retail and culture, hospitality, and sports (WTTC, 2017). The tourism sector of a country
provides benefits and opportunities for its people. The tourism industry belongs to the service
sector of the economy, which has its unique characteristics (Haq et al., 2014; Gamage et al.,
2017).

2. EDUCATION - The education sector in India, which was slow to change, has been
witnessing a massive transformation recently with changing job landscape,
technological disruptions, demand for quality education and the implementation
of National Education Policy (NEP) 2020. The pandemic caused further shocks to
the system with schools forced to shut down during the lockdown period, and the
transition of students and teachers to online teaching-learning. In India, around
250 million students were affected due to school closures at the onset of
lockdown induced by COVID-19. The pandemic posed several challenges in
public and private schools which included an expected rise in dropouts, learning
losses, and increase in digital divide.

The impact of the pandemic across five themes and maps the various initiatives
undertaken by governments and civil society organizations to address the challenges:
1. curtailing dropouts during and post pandemic
2. decline in learning outcomes and well-being
3. integration of digital based learning
4. the role and capacity of teachers and
5. sustainability of private schools.
3. TEXTILE INDUSTRY- Textile Industry is one among the biggest contributors to the
country's exports with around 11.4% share in India's total export earnings for the fiscal
period ended 2018-19 valuing to almost USD 37.5 billion (INR 2,596 billion) and
growing at a CAGR of seven since 2004-05. The COVID-19 global pandemic has effects
on all 7.8 billion folks in similar and unique ways. We are reeling from rising COVID-19
related death rates, broken health systems, hunger and starvation, joblessness,
lockdowns of varying severity, a shadow pandemic of force, and this may be just the tip
of the iceberg. The style industry has taken a troublesome hit. From the material to the
spiritual, the supply chain to the ideological basis of its existence every aspect of
the industry is being wrung bent on dry because of what's being called 'fashion's
Darwinian shakeout'. The previous number of months has seen fashion houses,
retailers, influencers and fashion magazines introspect and pivot, in expected and
surprising ways. Some have made small shifts, while others are forced to form more
fundamental changes. The Indian fashion industry has responded in thoughtful and
interesting ways. The fashion Design Council of India (FDCI), as an
example, was amongst the first to announce a COVID-19 Support Fund for tiny
businesses and young designers in need. Everyone, expectedly, is manufacturing masks,
partly so their business gets to stay open as an 'essential service'. But
masks are a controversial 'contribution' to the case, providing it isn't really about how
masks look but how they work that's important. Moreover, the kind of mask you wear is
an expression of sophistication and establishes exactly where you're located on the
social ladder. To wear a designer mask would seem quite tone unheeding the mood at
the moment.

4. HOSPITALITY INDUSTRY- The hospitality industry in India is declined very sharply in

the earlier quarters in 2020 as the outbreak of covid-19 which has larger impact on
different areas of hospitality sector. Because of partial stoppage of traveling and
containment actions, there is a drastic decline in tourists and business traveling
activities. The results indicate that the owners of hospitality firms are agreed with
hospitality industry is having poor business activities, unable to pay salaries to
employees, generating low liquidity, unable to repay loans and other dues, engaging
minimum quantum of employees, not getting sufficient financial support, not receiving
future contracts and losing their regular revenues. Significant difference is there
amid impact of covid-19 on hospitality industry and profile of hospitality firms.
Impact of covid-19 on hospitality industry is negatively, significantly and highly
related with performance of hospitality firms. Hence, covid-19 situation is
severely affecting operation and progress of hospitality firms in particular and
industry in general and they are in need of adequate financial support from
banking sectors and government immediately.
Hospitality firms must create and adopt efficient revenue generation and management
models for pricing their services and products in order to respond changes occurring in
the market quickly. In addition, government should extent financial relief measures and
give tax exemption for one year for hospitality firms.
 OBSERVATIONS AND INTERPRETATIONS-

The economic impact of the COVID-19 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. The contraction will not be uniform, rather it
will differ according to various parameters such as state and sector. On 1 September
2020, the Ministry of Statistics released the GDP figures for Q1 (April to June) FY21,
which showed a contraction of 24% as compared to the same period the year before.

According to Nomura India Business Resumption Index economic activity fell from 82.9
on 22 March to 44.7 on 26 April. By 13 September 2020 economic activity was nearly
back to pre-lockdown. 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 140 million (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.[5] The Indian economy was expected to lose
over ₹32,000 crore (US$4.2 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.

Vendor of greens, essential supply chains and logistics. Life under lockdown. Bangalore
spring 2020. Major companies in India such as Larsen & Toubro, Bharat Forge,
UltraTech Cement, Grasim Industries, Aditya Birla Group, BHEL and Tata Motors
temporarily suspended or significantly reduced operations. Young start-ups 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 losses 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.
 Moody's Investors Service (Moody's) revised its estimate of India's GDP growth for
2020 from 5.3% to 2.5%. Fitch Ratings revised its estimate for India's growth to 2%.
'India Ratings & Research' also downgraded the FY21 estimate to 3.6%. In April 2020,
the World Bank and rating agencies downgraded India's growth for fiscal year 2021
with the lowest figures India has seen in three decades since India's economic
liberalization in the 1990s. On 12 April 2020, a World Bank report focusing on South
Asia said that India's economy is expected to grow 1.5% to 2.8% for FY21. The World
Bank report said that the pandemic has "magnified pre-existing risks to India's
economic outlook".[193] In mid-April the International Monetary Fund projection for
India for the FY21 of 1.9% GDP growth was still the highest among G-20 nations.[195]
Confederation of Indian Industry (CII) estimated that India's GDP for FY21 will be
between 0.9% and 1.5%.

GDP predictions for FY21 post announcement of economic package (May 2020)
SN Agency Estimate
1 Bernstein −7%
2 ICRA −5%
3 Goldman Sachs −5%
4 Nomura −5%
5 Fitch −5%
6 SBI −4.70%
7 CARE Rating −1.5%–1.6%

On 28 April the former Chief Economic Advisor (CEA) to the Government of India has
said that India should prepare for a negative growth rate in FY21. On 22 May the RBI
Governor Shaktikanta Das also said India's GDP growth will remain negative in FY21.
Following the announcement of India's economic package numerous agencies
downgraded their GDP predictions for FY21. Ratings agency ICRA downgraded
estimates to −5%, Goldman Sachs also predicted the same estimate of −5%.

Energy Night lights and economic activity are connected. In Delhi, night light radiance
fell 37.2% compared to 1–31 March 2019. This was the biggest fall for any metro in
India. Bangalore fell 32% while Mumbai dropped by 29%. India's fuel demand in April
2020 as compared to the previous year fell nearly 46%. Consumption of fuel was the
lowest since 2007. Cooking gas (LPG) sales rose ~12%. An International Energy Agency
report in April estimated India's annual fuel consumption will decline 5.6% in 2020.
Diesel demand will drop ~6%. By the first half of June 2020, India's fuel demand was
80–85% of what it was before the lockdown. However, the Indian oil minister said that
it would take a much longer time for the growth in demand to be restored to pre-
COVID-19 levels.

Oil prices dropped sharply in 2020 following the COVID-19 pandemic. Demand also fell
sharply. By mid-May India had already filled its strategic storage including storing oil on
ships across the world. India is now looking at storing oil in other nations including
America. India also plans to increase its local strategic storage capacity for oil.
Agriculture -
A study during the first two weeks of May month 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$2.4 billion) had been transferred to farmers under the PM-KISAN scheme. Odisha
passed new laws promoting contract farming.

Manufacturing-
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 momentarily 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.

CONCLUSION-

India has emerged as the fastest-growing major economy in the world and is expected
to be one of the top three economic powers in the world over the next 10-15 years,
backed by its robust democracy and strong partnerships.

India’s nominal gross domestic product (GDP) at current prices is estimated to be at Rs.
232.15 trillion (US$ 3.12 trillion) in FY2021-22. India is the third-largest unicorn base in
the world with over 83 unicorns collectively valued at US$ 277.77 billion, as per
the Economic Survey. By 2025, India is expected to have 100 unicorns, which will create
~1.1 million direct jobs according to the Nasscom-Zinnov report ‘Indian Tech Start-up’.
India needs to increase its rate of employment growth and create 90 million non-farm
jobs between 2023 and 2030s, for productivity and economic growth according to
McKinsey Global Institute.
The net employment rate needs to grow by 1.5% per year from 2023 to 2030 to achieve
8-8.5% GDP growth between 2023 and 2030. According to data from the Department of
Economic Affairs, as of January 28, 2022, foreign exchange reserves in India
reached the US$ 634.287 billion mark.

With an improvement in the economic scenario, there have been investments across
various sectors of the economy. The private equity - venture capital (PE-VC) sector
recorded investments worth US$ 6.8 billion across 102 deals in November 2021 42%
higher than November 2020. Some of the important recent developments in the Indian
economy are as follows:
India’s merchandise exports between April 2021 and December 2021 were estimated at
US$ 299.74 billion (a 48.85% YoY increase). In December 2021, the Manufacturing
Purchasing Managers' Index (PMI) in India stood at 56.4.
The gross GST (Goods and Services Tax) revenue collection stood at Rs. 1.38 trillion
(US$ 18.42 billion) in January 2022. This was a 15% rise over a year ago.
According to the Department for Promotion of Industry and Internal Trade (DPIIT), FDI
equity inflow in India stood at US$ 547.2 billion between April 2000 and June 2021.
India’s Index of Industrial Production (IIP) for November 2021 stood at 128.5 against
126.7 for November 2020.
Consumer Food Price Index (CFPI) – Combined inflation was 2.9% in 2021-22 (April-
December) against 9.1% in the corresponding period last year.
Consumer Price Index (CPI) – Combined inflation was 5.20% in 2021-2022 (April-
December) against 6.6% in 2020-21
Foreign portfolio investors (FPIs) invested Rs.50,009 crore (US$ 6.68 billion) in the
Calendar year 2021.
The wheat procurement in Rabi 2021-22 and the anticipated paddy purchase in Kharif
2021-22 would include 1208 lakh (120.8 million) metric tonnes of wheat and paddy
from 163 lakh (16.7 million) farmers, as well as a direct payment of MSP value of 2.37
lakh crore (US$ 31.74 billion) to their accounts.

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