Study on the Impact of

second wave of Covid-19

on Indian Economy.
Presentation by- Vaishnavi Tripathi (C027)
BA LLB Div. C
INDIAN ECONOMY BEFORE SECOND
WAVE
• While these restrictions served to contain the spread of Covid-19, causing serious
economic damage.

• India's economy appeared to be turning a corner early this year, as the country
began to emerge from the 2020 recession.

• Devastating spike of Covid-19 cases jeopardized that progress.

• 1.6% increase in GDP in the January-March quarter compared to the same time a
year ago.

• India entered recession for the first time in over a quarter-century last year.

• OECD forecasted that India will reclaim its position as the world's fastest growing
major economy, with 12.6% growth in the current fiscal year.

• But that was before a brutal second wave of the pandemic hit the country.
 EXAMINING THE IMPACT OF SECOND
•
WAVE
Impact on economy because of decreased consumption.
• More limitations and a higher viral penetration lead to a reduction in population
mobility. Because of the limited travel, private consumption will be reduced.
• This is significant since private spending accounts for more than half of India's
GDP.
• When compared to the first wave, the severity of lockdown measures is
comparatively mild (Fig. 1).
• When we examine at the high frequency statistics on mobility (Fig. 2), we can see
that the Indian population has taken things within their own hands, since people's
movements have dropped substantially.
• People are restricting their movement as much as they were in the third quarter of
last year.
• However, the link between lockdown and mobility is significantly weaker than in
the second wave.
• Impact on the manufacturing sector
• The majority of the manufacturing sector had to work at a reduced capacity or shut
down in order to stop the spread of the coronavirus.
• Manufacturing of non-essentials was impacted harder and for a longer period of
time.
• Fears of extended lockdowns prompted a return to the communities.
• Furthermore, following the initial wave, the global and local supply networks had
not entirely stabilised.
• This has resulted in increasing raw material costs for both small and large
businesses.
  Impact on GDP growth

• In 2020-21, the first wave has already taken a toll on India's GDP. India's GDP shrank by 7.3
percent in FY21, the worst contraction in the country's history, according to official statistics
released this week.

• While India's economy was projected to recover faster than the rest of the major economies in
FY22, the second wave has already slowed growth in the first quarter.

• The lower per capita income not only reflects increased disparity between affluent and poor
people, but it also demonstrates how poverty is increasing in India.

 Rising Unemployment

• the state-by-state limitations have had a similar catastrophic effect on small firms and their staff.

• One crore Indians lost work during the second wave, according to the Mumbai-based research
tank Centre for Monitoring Indian Economy, and the figure is still growing. T

• he second wave has also resulted in a significant increase in healthcare spending, leaving most
households in the country with smaller savings.

• The first wave of the coronavirus epidemic had driven many individuals into poverty, and the
second wave exacerbated the problem by increasing the amount of money people had to spend
on healthcare.

• According to the Centre for Monitoring Indian Economy, unemployment has already surpassed
10% in May, a level not seen since the shutdown last year.
 COMBATING THE ECONOMIC CONSEQUENCES
 Need of new fiscal stimulus:

• To avoid severe economic contractions and negative economic divergences into the rest of 2021, the current wave of illnesses may necessitate further government
stimulus.

• When we look at the magnitude of the initial fiscal stimulus package (Fig.4), we can see that it is tiny in comparison to the developed G20 nations.

• But consideration of some fundamental factors like government debt is even more important than making peer comparisons (Fig.5).

• In 2020, India's government debt grew substantially, making it the largest in Southeast Asia (Fig.5).

• Increased spending by the Indian government in the form of a second Covid19 stimulus plan would likely avoid a drop in economic production in the
medium term, but it will also put greater pressure on debt sustainability in the long run, thus mortgaging the country's future.

• There have been no fresh government announcements for extra fiscal stimulus to help the economy during the second wave of the epidemic as of this
writing, although it may be made soon.

4.2 Accommodative RBI policy:

Much of the additional stimulus is aimed at improving system liquidity and ensuring the flow of credit to key areas of the economy. The central bank aims to:
• enable banks to provide lending to entities connected to the grave healthcare situation,
• give extra liquidity to small banks and finance providers, and
• encourage the flow of financing to MSME enterprises.

The Reserve Bank of India (RBI) started a government bond purchase programme in April, dubbed the GSAP 1.0, in which:
“RBI will commit upfront to a specific amount of open market purchases of government securities with a view to enabling a stable and orderly evolution of
the yield curve amidst comfortable liquidity conditions.”
 CONCLUSION
The Coronavirus outbreak is a catastrophe, and in times like this, it's difficult to
anticipate anything, and we're surrounded by a lot of unknowns. Market dynamics
and commercial activity face additional hurdles as a result of Covid-19. The
Covid-19 problem is escalating, and new challenges are arising. It is self-evident
that after Covid-19, a new normal will arise. The second wave of COVID-19 has
had a less negative impact on the Indian economy than the first, but the
surrounding concerns persist. India has not begun to address this issue in a
systematic manner, but it is critical that it be given maximum attention. As a
result, it is high time to recognise the situation, and we must work closely
together to address this issue and bring new plans and activities to light. Indians
must be well-informed and well-versed in the circumstances in order to cope with
it. This will benefit the country as a whole and will provide a clear economic path.
Going ahead, resilience thinking should influence lessons learned, and
innovations should focus on the general well-being of the population rather than
only on increasing the competitiveness, profitability, or development of
enterprises and national economies. This has not yet begun in India in a
systematic manner, and it must be prioritized alongside measures to address the
health problem. Some measures may be harsh, but they must be moderated in
order to achieve long-term goals.