Economic

Report of
India
Impacts of COVID-19
 Executive Summary

Impact on GDP

Impact on Inflation

Impact on Unemployment
CONTEXT

Impact on Fiscal Policies

Impact on Monetary Policies

Impact on International Trade

Conclusion
 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. Given the nature of the disease which is highly contagious, the
ways to contain the spread include policy actions such as 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. These actions can potentially lead to dire consequences
for economies around the world. In other words, effective containment
of the disease requires the economy of a country to stop its normal
functioning. This has triggered fears of a deep and prolonged global
recession. The chief of International Monetary Fund had mentioned
that the year 2020 would see the worst global economic fallout since
the Great Depression in the 1930s, with over 170 countries experiencing
EXECUTIVE SUMMARY

negative per capita GDP growth due to the COVID-19.

The world has witnessed several epidemics such as the Spanish Flu of
1918, outbreak of HIV/AIDS, SARS (Severe Acute Respiratory Syndrome),
MERS (Middle East Respiratory Syndrome) and Ebola. In the past, India
has had to deal with diseases such as the small pox, plague and polio.
All of these individually 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. Many
experts have already called this a Black Swan event for the global
economy.

India announced its fiscal measures in two tranches with first tranche
promising INR 1.7 trillion rupees (USD 23 billion) for households and
businesses and a second more enhanced tranche of measures targeting
businesses (about 2.7 percent of GDP) and expanding support for poor
households, especially migrants and farmers (about 1.5 percent of GDP).

Economic Report of India

- Impacts of COVID-19
 Everyday analyst and agency reports are diving into new bottoms of
a fall-down in economic activities. Indian economy, however, has a
slightly different story to tell at this hour of crisis. The silver lining
for the Indian economy comes from a steep fall in the crude oil prices
from around $70 per barrel to a record 18 years low of $22 per
barrel. This windfall gain can, to some extent, offset the direct losses
due to COVID-19. At the same time, dreams like a $5 trillion economy
no longer look even a remote possibility. This article takes stock of the
likely impact of COVID-19 on the Indian economy in the short term and
the long term.
EXECUTIVE SUMMARY

The COVID-19 induced economic disruptions, up to 135 million jobs could

be lost and 120 million people might be pushed back into poverty. All
of which should have a hit on consumer income, spending, savings and
their living standards. The worst of COVID-19's impact would felt by
India's most vulnerable in terms of job loss, poverty increase and
reduced per-capita income, which in turn will result in a steep decline
in the Gross Domestic Product (GDP). Especially informal/unorganised
migrate labour force severely affected due to Covid-19, nearly 70
percent of the labour force lose their jobs. It is essentially to accelerate
the recovery which includes strengthening the 'safety net' significantly
for the most vulnerable, enabling the survival of small and medium
businesses, restarting the rural economy and providing targeted
assistance to at-risk sectors. The study also emphasised on policy
package of the government towards the depress caused due to COVID-
19.

Economic Report of India

- Impacts of COVID-19
 The GDP is the total of all value added created in an economy. The
value added means the value of goods and services that have been
produced minus the value of the goods and services needed to produce
them, the so-called intermediate consumption

India's economy contracted by an unprecedented 7.3 percent in

FY2020/21 following the COVID-19 pandemic. The second wave of the
pandemic resulted in another sharp fall in activity, albeit smaller and
shorter. However, recent high frequency indicators suggest an ongoing
recovery.
IMPACT ON GDP

India's GDP accounts for around 7 percent of the world and 80% of
the South Asia total in purchasing-power party (PPP) terms. The re-
orientation of vaccines to domestic use may have implications for the
COVAX vaccine delivery.

State-level empirical analysis suggests that social distancing and

containment measures have effectively reduced case numbers but have
come with economic costs, according to researchers at the Indian
Institute of Public Health (IHG).

After two consecutive quarters of contraction, growth resumed in 2020

Q4 (0.5 percent) and 2021Q1 (1.6 percent).

Economic Report of India

- Impacts of COVID-19
 Public sector debt is projected to reach 73 percent of GDP in 2021
before gradually declining to under 60 percent. The financial system
remained resilient during the pandemic, in part owing to the regional
central bank's (BCEAO) accommodative stance.

Preliminary estimates for Q2:2020-21 indicate that the financial savings

regressed closer to the pre-pandemic levels to 10.4 per cent of gross
domestic product (GDP) after touching the unprecedented high of 21.0
per cent in Q1: 2020-21. Consumption of motor spirits and high-speed
diesel recovered after contracting by 35.9 per cent and 33.3 per cent,
respectively, in Q1:2020-21. The moderation in GDP contraction coincided
with the reduction in household financial savings rate to 10.4 per cent.
India's economy contracted by an unprecedented 7.3 percent in
FY2020/21 following the COVID-19 pandemic. The second wave of the
pandemic resulted in another sharp fall in activity, albeit smaller and
IMPACT ON GDP

shorter. Recent high frequency indicators suggest an ongoing recovery.

The re-orientation of vaccines to domestic use may have implications
for the COVAX vaccine delivery.

Economic Report of India

- Impacts of COVID-19
 Headline CPI inflation ticked up in October to 4.5 per cent from 4.3 per
cent in September, after falling sharply between June and September.
This uptick mainly reflected a spike in vegetable prices due to
unseasonal rains in some parts of the country. Hardening international
energy prices have kept domestic LPG and kerosene prices elevated
for nearly three quarters, edging up fuel inflation to 14.3 per cent in
October. The persistence of high core inflation (i.e., CPI inflation
excluding food and fuel) since June 2020 is an area of policy concern
in view of input cost pressures that could rapidly be transmitted to
retail inflation as demand strengthens. In this context, the reduction of
IMPACT ON INFLATION

excise duty and VAT on petrol and diesel will bring about a durable
reduction in inflation by way of direct effects as well as indirect
effects operating through fuel and transportation costs.

The inflation trajectory is, therefore, likely to be in line with our

earlier projections, and price pressures may persist in the immediate
term. Vegetable prices are expected to see a seasonal correction with
winter arrivals in view of bright prospects for the rabi crop. Supply
side interventions by the Government have limited the fallout of
continuing high international edible oil prices on domestic prices.
Though crude oil prices have seen some correction in the recent period,
a durable containment of price pressures would hinge on strong global
supply responses to match the pick-up in demand as pandemic
restrictions ease. Cost-push pressures continue to impinge on core
inflation, though their pass-through may remain muted due to the
slack in the economy.

Economic Report of India

- Impacts of COVID-19
 Our monetary policy stance is primarily attuned to the evolving
domestic inflation and growth dynamics. Yet, imminent shifts in
monetary policy settings by systemically important global central
banks are bringing about fresh challenges for domestic macro-
financial stability in the form of spillovers. In such a scenario,
domestic macro-fundamentals need to be resilient, with appropriate
IMPACT ON INFLATION

policy stances and actions, and strong buffers. In this context, a well-
entrenched nominal anchor provided by the flexible inflation targeting
framework has imparted credibility and flexibility to monetary policy
to effectively address growth concerns during the pandemic. In the
current situation, it is important to keep inflation aligned with the
target while focusing on a robust growth recovery. Simultaneously, the
Reserve Bank remains cognizant of the need to ensure that financial
conditions are rebalanced in a systematic, calibrated and well-
telegraphed manner while preventing build-up of financial stability
risks. Price stability remains the cardinal principle for monetary
policy as it fosters growth and stability. Our motto is to ensure a soft
landing that is well timed.

Economic Report of India

- Impacts of COVID-19
 Unemployment rise to 35 per cent from 7.6 per cent resulting in 136
million jobs lost and a total of 174 million unemployed. Poverty
alleviation will receive a set-back, significantly changing the fortunes
of many, putting 120 million people into poverty and 40 million into
abject poverty. "India is headed towards a W-shaped economic
recovery with a potential GDP contraction of 10.8 per cent in FY 20-21.
An opportunity loss of USD 1 trillion is staring India in its face.

The informal economy runs on a daily basis, so the real brunt of the
lockdown has to be faced by the people such as rickshaw pullers,
IMPACT ON UNEMPLOYMENT

vegetable vendors, small pity shops and construction workers. They are
the worst hit segment in the economy.

With every passing week of the nationwide lockdown, more workers

and labourers are losing trust in the job market and leaving it. The
labour participation rate has dropped by 7.2 percentage points to a
mere 35.4 per cent during the lockdown so far, showing a big portion
of the working-age population has quit the labour markets, said the
Centre for Monitoring Indian Economy (CMIE). It also underlined that
over 7 crore people have quit the labour markets in a month. The
severe fall in the labour participation rate has also pulled down the
unemployment rate to the lowest level during the national lockdown as
people who do not intend to work are not considered unemployed.

Economic Report of India

- Impacts of COVID-19
 The unemployment rate stood at 21.1 per cent during the week ended
April 26, from the 26.2 per cent rate recorded in the preceding week.
The national lockdown did not just throw 7.2 crore out of the labour
force but it also drove another 8.5 crore to some kind of desperation
to look for jobs in the middle of a national lockdown when none were
available and this desperation suggests that people were highly
vulnerable to a loss of livelihood caused by the lockdown,
IMPACT ON UNEMPLOYMENT

Economic Report of India

- Impacts of COVID-19
 Hardest hits are migrant labours, nearly 70 percent of the labour
force lose their jobs, as far as auto manufacturing sector it may get
worst because the demand likely to stay low and 55 percent of
employees on contract who can be fired easily., in auto dealership is
concerned it became worse because labour is the 40 percent of the
dealer cost hence cutting jobs is easy way to cut cost. In retail
organised and unorganised sector due to down fall in consumes trade,
IMPACT ON UNEMPLOYMENT

more jobs may go, and Samsonites largest franchisee Bag zone
lifestyle is shutting 100+ stores.

In real estate sector the demand has already been a very low; due to
pandemic the middle class may defer home buying.

Tourism unlikely pick up even later this year, allied sectors such as
guides and tourist transport can see 10-12m more job losses.Restuarent
sector may not recover for months,4 out of 10 restaurants may not
open. If industry, real estate stays down, most job losses may be in
secondary steel sector. If entertainment industry faces a demand
crunch with virtually no ad revenue, media industry has been hit hard.
Broad casting 5 percent job cuts, radio 8 to 10 percent and print media
are facing job losses too. Low demand and tight funding may claim
more jobs; Ola has fired around 5000 this year. Only IT sector has
been a minimal effect on job loss. Internet business has also been
recorded the job loss of 80,000 to 1 lakh.

Economic Report of India

- Impacts of COVID-19
 The unemployment rate fell from 27.1 percent to 24 percent for the
week ended May 10 while the labour participation rate rose from 36.2
percent to 37.6 percent as the government opens up industries in a
staggered manner. Employment rate also rose from 26.4 percent to 28.6
percent. Data from CMIE’s Consumer Pyramids Household Survey
shows youngsters in the age group 20-24 years accounted for 11% of
those who lost jobs while they constituted 8.5% to the total employed
IMPACT ON UNEMPLOYMENT

persons in the country in 2019- 2020. According to CMIE, another 14

million jobs were lost in the age-group 25-29 years. “This loss again,
was disproportionately high as this group accounted for 11.1% of total
employment in 2019-20 but it accounted for 11.5% of the job losses.

Government of India announced on 24th March 2020 certain relief

measures in view of COVID-19 outbreak. March 26: INR 1.7 trillion (~USD
22 billion) relief package announced by the Finance Minister and 20
lakh cores package in the month of April to the farming sector and
agribusiness activities followed by weavers, construction workers, auto
and taxi drivers MSME.etc,. The relaxation in the lockdown can
immediately reduce some pain and damage done to the livelihoods. The
partial relaxation of the lockdown from the week of April 20 did
have an impact on employment, majorly in the agriculture and rural
areas because the initiatives under taken by the central Government to
ease the situation.

Economic Report of India

- Impacts of COVID-19
 India announced its fiscal measures in two tranches with first tranche
promising INR 1.7 trillion rupees (USD 23 billion) for households and
businesses and a second more enhanced tranche of measures targeting
businesses (about 2.7 percent of GDP) and expanding support for poor
households, especially migrants and farmers (about 1.5 percent of GDP).

In the fiscal package announced by the government it has committed:

1. To pay employee provident fund contributions on behalf of

employees and employers for the next three months for small
firms.
IMPACT ON FISCAL POLICIES

2. Amend pension regulations to allow workers to draw up to 75%

for their contingency expenditure non-refundable advance or three
months of wages in advance, whichever is less. This is intended to
benefit 48 million workers,
3. In a relief to small and medium enterprises facing the threat of
insolvency because of COVID19, the threshold for invoking
insolvency has been raised 100-fold to INR 10 million,
4. During May 13-17, the Finance Minister announced new measures
targeting businesses (about 2.7 percent of GDP), expanding support
for poor households, especially migrants and farmers (about 1.5
percent of GDP), targeted support for the agricultural sector (about
0.7 percent of GDP), and some expansion of existing programs
providing work opportunities to low-wage laborers (about 0.2
percent of GDP).
5. Key elements of the business-support package were various
financial sector measures for MSMEs and non-bank financial
companies; liquidity injection for electricity distribution companies;
and a reduction in up-front tax deductions for workers. Additional
support to Page 12 of 30 farmers will mainly be in the form of
providing concessional credit to farmers, expansion of food
provisioning scheme.

Economic Report of India

- Impacts of COVID-19
 Given the state of the economy and especially the state of the
financial institutions, the policy levers available to the government to
deal with the economic crisis are limited. When the effects of 2008
Global Financial Crisis (GFC) were felt in India, the domestic economy
was in a better shape having experienced a credit boom and a high
growth rate for the preceding years and the government was also in a
position to implement both monetary and fiscal stimulus measures.
More importantly, the financial institutions were not so badly damaged.

In contrast, the fiscal deficit of the government was already high in

IMPACT ON FISCAL POLICIES

the pre-Covid-19 period and had breached the target as specified in the
FRBM Act (Fiscal Responsibility and Budget Management Act). The
fiscal deficit of the central government in 2019-20 was 4.6% of GDP
against the target of 3.5% of GDP. This has been the highest fiscal
deficit since 2012-13. The Finance Minister in her Budget Speech of
February 1, 2020 had pegged the target for FY2021 to 3.5% (table 1)
which will be breached by a wide margin. The FM had already used
the escape clause provided under the FRBM Act to allow the relaxation
of target for 2019- 20. The clause allows the government to relax the
fiscal deficit target for up to 50 basis points or 0.5%.

Economic Report of India

- Impacts of COVID-19
 This shows that the government now has very little fiscal room. As the
crisis unfolds, falling tax collections, declining revenues of public sector
enterprises and rise in health sector expenses will further hamper the
ability of the government to support the economy. Even without any
additional expenditure, the deficit would go up substantially because of
the decline in tax revenues and disinvestment receipts. Net tax
revenues in April 2020 fell by a staggering 70% compared to April
2019. If state-level deficits are added, then the overall fiscal deficit in
2020-21 could very well exceed 10% of GDP, even without taking into
IMPACT ON FISCAL POLICIES

account the off-balance sheet items. Financing such high levels of

deficit poses a serious challenge.

Policies focusing on low-income households include repackaging old

schemes, increasing the allocation of existing schemes, and some new
initiatives:

Front-loading payments under the existing Pradhan Mantri Kisan

Samman Nidhi (PM-KISAN) Yojana to the tune of Rs. 160 billion
Direct benefit transfers (DBT) to old age people, and widows, under
Ujjwala Yojana, and under Jan Dhan Yojana amounting to Rs. 470
billion
Extending MGNREGA (Mahatma Gandhi National Rural Employment
Guarantee Act) to migrant workers, and to some workers in
organised employment, adding up to about Rs. 922 billion
A fund for construction workers of about Rs. 310 billion
Direct food distribution using stocks available with the Food
Corporation of India (FCI) to the tune of Rs. 35 billion

Economic Report of India

- Impacts of COVID-19
 A major component of the ‘fiscal package’ is the MSME loans backed
by 100% government guarantee (Sengupta and Vardhan, 2020a). Given
the risk aversion in the banking system, the government needs to step
in to bear some of the credit risk, so that banks can do what they are
IMPACT ON FISCAL POLICIES

good at, which is, allocating capital. To this end, a credit guarantee
scheme is a step in the right direction. Another advantage is that credit
guarantees do not have immediate impact on the government budget.
However, there are two issues with the announced scheme. First,
credibility of a credit guarantee scheme and the lenders’ trust in it
depends a lot on the details of the scheme. There may not be any take
up until the government clarifies the mechanics of the scheme (such as
conditions imposed on availability of the guarantee, time line to make
claims and en-cash the guarantee, etc). Second, even if these issues are
resolved to banks’ satisfaction, credit allocation may be distorted
because with a 100% credit guarantee, banks have no skin in the game.
This takes away the incentive of the bank to scrutinise loan
applications, and can lead to moral hazard. Instead, the credit
guarantee could have been a partial one.

Economic Report of India

- Impacts of COVID-19
 The Monetary Policy Committee of the Reserve Bank of India
delivered a 115-basis points reduction in the policy repo rate and
announced an accommodative stance of monetary policy.

The central bank also announced several liquidity measures to combat

the adverse impacts of covid19, including:
IMPACT ON MONETARY POLICIES

1. long-term repo operations targeted to reduce banks‘ cost of funds

for up to INR 1 trillion;
2. simultaneous purchase and sale of securities under open market
operations;
3. reduction in the cash reserve ratio requirements and exemption
from cash reserve ratio (CRR) requirements to incentivize lending
to specific sectors;
4. targeted long-term repo operations, with the objective of making it
easier for non-bank financial companies (which tend to lend more
to small business and informal workers than banks) and micro- finance
institutions to raise money;
5. moratorium on debt-servicing of all term loans outstanding
including working capital loans for 3 months;
6. RBI has also introduced a special liquidity facility for mutual
funds of INR 500 billion in order to ease the liquidity pressures on
MFs,
7. increased the temporary loans limit of states by 60% from an
already increased 30% (announced on 1 April 2020), providing states
with an additional channel to borrow from the RBI, instead of
relying on additional market borrowings.

Economic Report of India

- Impacts of COVID-19
 Monetary policy has its limitations too which had become apparent in
the run-up to this crisis. In response to the growth slowdown, the
IMPACT ON MONETARY POLICIES

Reserve Bank of India (RBI) embarked on a path of monetary

expansion. Between October 2018 and December 2019, it freed up around
Rs. 4 trillion of liquidity through open market operations15, and reduced

the repo rate16 by 135 basis points to 5.15% – the lowest since March
2010. Yet, credit growth did not pick up, primarily due to the heightened
risk aversion in the banking sector, as discussed earlier, and low credit
demand from the stressed private corporate sector.

Monetary policy transmission in India has been weak owing to

structural deficiencies such as illiquid bond market, large sections of
the population left out of the formal financial system etc. In addition,
an impaired banking system and lacklustre investment demand from
the private corporate sector, will further hamper the transmission of a
policy rate cut to aggregate demand and hence growth.

Economic Report of India

- Impacts of COVID-19
 On 27 March, 2020 RBI announced a number of major initiatives to
combat the crisis.29 In particular, Four bold measures were taken,
following an “out of cycle” i.e., unscheduled Monetary Policy Committee
(MPC) meeting:

The repo/reverse repo rates were cut by sizeable amounts, to

4.40/4.00% from 5.15/4.90%. The 91- day Treasury bill rate, which
IMPACT ON MONETARY POLICIES

measures the de facto stance of monetary policy, dropped to 4.31%

from 5.09% on 26 March. Subsequently in April the repo rate was
further cut to 4%.
Ordinarily, banks can borrow on a short-term basis from the RBI
using the repo window. To supplement this facility, a new `targeted
long-term repo operations' (T-LTRO) mechanism, with a limit of Rs.1
trillion, was announced. Banks may find this attractive because
they do not have to mark to market the investments made with
these borrowed funds for the next three years. However, there is a
condition: the money that is borrowed here must be deployed in
investment-grade corporate bonds, commercial paper, and non-
convertible debentures, over and above the outstanding level of
their investments in these bonds as on March 27, 2020.
Subsequently RBI announced another round of such targeted repo
operations..
The cash reserve ratio (CRR) was reduced by 1 percentage point,
bringing it down to 3% of deposits (“net demand and time
liabilities”). This is the first time the CRR has been changed in the
last 8 years.

Economic Report of India

- Impacts of COVID-19
 Banking regulation requires banks to recognise and provide for a
loan when there is a delay in payment. According to the Prudential
Framework for Resolution of Stressed Assets, banks are required
to classify loan accounts in special mention categories in the event
of a default.30 The account is to be classified as SMA-0, SMA-1 and
SMA-2, depending on whether the payment is overdue for 1-30
days, 31-60 days or 61-90 days, respectively. RBI has now modified
this regulation, so that banks can offer a moratorium of 90 days
(subsequently extended to 180 days) for term loans and working
capital facilities for payments falling due between 1 March, 2020
IMPACT ON MONETARY POLICIES

and 31 May, 2020. If a firm applies for and receives a moratorium,

the loan account in consideration will continue to be recognised as
a standard asset and the SMA classifications will no longer apply.
Interest on the term loans will continue to accrue during this
period.

Monetary policy is most effective when economic agents understand

and can anticipate the behaviour of the MPC. This process of learning
and understanding is still underway, since India is in the early years
of building up the credibility of the inflation targeting (IT) framework
and the MPC process. So, one would have expected that the MPC
statement would take pains to spell out its macroeconomic forecast,
explaining why it believed the rate cut was consistent with its
commitment to the 4% inflation target. But it did no such thing.

The MPC statement did not explain the rate decision in the context of
a revised inflation forecast, or any other element of a macroeconomic
forecast. Indeed, it did not offer any justification at all for the
magnitude of rate cut chosen. Since the rate cut announcement was not
couched in the standard IT framework, the public does not have the
assurance that the rate cuts will be reversed when inflation begins to
rise again.

Economic Report of India

- Impacts of COVID-19
 India was greatly affected by the coronavirus (COVID-19) pandemic in
various sectors. Intending to get hold of the situation, India announced
its first nation-wide lockdown in March 2020, which led to the
economic slowdown. Consequently, international trade took a huge hit
IMPACT ON INTERNATIONAL TRADE

as well. In April 2021, imported commodities, specifically silver, pulses

and newsprint, faced more than 27 percent decline compared to
previous year. By contrast, gold, precious, semi-precious stones and
pearls, had a positive change rate.

During FY20, contraction in India’s exports and imports left a trade

deficit of $152.9 billion.

Economic Report of India

- Impacts of COVID-19
 COVID-19’s direct impact on India’s industries
China being the initial epicentre of the outbreak, caused a global
slowdown. It is estimated that a reduction of 2 percent in China’s
exports in 2020 will lead to a USD 50 billion decline in exports in
global value chains. China is India’s leading import destination with
imports valued at USD 68.1 billion in 2019, accounting for a share of 14.2
percent in India’s total imports from the world. UNCTAD estimates that
the spill-over effects of the disruption in Chinese supplies could cost
IMPACT ON INTERNATIONAL TRADE

India’s exports around USD 348 million, with the most impacted sectors
being chemicals, textiles and apparel, automotive, and metals and metal
products. The chemicals sector is estimated to be impacted by USD 129
million, followed by textiles and clothing with a USD 64 million decline.
UNCTAD places India 10th among the 20 most-affected economies due to
the coronavirus epidemic and China’s slowdown in production.

Export:
The total and disaggregated data on services exports from India from
financial year 2016–2017 to 2019–2020. Modern and technology-intensive
services such as telecommunications, computer and information
services, other business and professional services comprise of over 70%
share in India’s exports in all the years, followed by travel and
transport services. To better understand the impact of the pandemic on
sectoral services exports

Economic Report of India

- Impacts of COVID-19
 The highest exposure of COVID-19 on Indian sectors relates to products
that make around 18 percent of India’s total export basket, i.e., the
Textiles, Clothing and Transportation sectors. Moderate exposure can be
seen for India’s top 3 exports, which are Fuels, Chemicals, and Stone
and Glass, which make up more than 40 percent of India’s exports.
Sectors that are less dependent on export markets, such as vegetables,
plastic and rubber, animals, food products, etc., face the lowest risks of
IMPACT ON INTERNATIONAL TRADE

exposure.

Economic Report of India

- Impacts of COVID-19
 Impact on India-Africa trade

India exported USD 29.5 billion worth of products to Africa in 2019,

while Africa exported USD 32.2 billion to India in that same year.
Africa’s imports from India amount to 6 percent of its total imports,
while Africa’s exports to India amount to 8.8 percent of its exports.
However, the composition of this trade is essential. Africa relies quite
significantly on India for fuels (India ranks 3rd as a supplier in terms
IMPACT ON INTERNATIONAL TRADE

of share), Machinery (India ranks 7th as a supplier in terms of share),

Pharmaceutical products (1st supplier) and cereals (4th supplier). These
are the 5 highest-ranking sectors in African imports from India. The
effects of a slowdown in India’s capacity to supply Africa will affect
Africa’s industry. It is also important to note the restrictions imposed by
India since March 2020 on the export of essential medicaments that are
a major import item for Africa as a whole (HS3004 – Medicaments of
mixed or unmixed products).

Economic Report of India

- Impacts of COVID-19
 Covid-19 has posed an unprecedented challenge for India. Given the
large size of the population, the precarious situation of the economy,
especially of the financial sector in the pre-Covid-19 period, and the
economy’s dependence on informal labour, lockdowns and other social
distancing measures are turning out to be hugely disruptive. The
central and state governments have recognized the challenge and have
responded but this response should be just the beginning.

The eventual damage to the economy is likely to be significantly

worse than the current estimates. On the demand side, the government
needs to balance the income support required with the need to ensure
the fiscal situation does not spin out of control. The balance struck so
far seems to be a reasonable one but the government needs to find a
greater scope for supporting the incomes of the poor. Involvement of
the state and local governments may also be crucial in the effective
CONCLUSION

implementation of further fiscal initiatives.

Policy makers need to be prepared to scale up the response as the

events unfold so as to minimise the impact of the shock on both the
formal and informal sectors and pave the way for a sustained
recovery. At the same time they must ensure that the responses
remain enshrined in a rules-based framework and limit the exercise
of discretion in order to avoid long-term damage to the economy.

India is already falling short in meeting its growth expectations in the

last two FY. The GST collection is also not at par. The situation of
COVID-19 is aggravating the financial health of the country even more
worsen. As per the UN report, India will be impacted by $348 mn on its
trade due to Corona Virus. The figure shall increased even further
depending on the period of lockdown, locally & globally..

Economic Report of India

- Impacts of COVID-19