The Indian economy was slowing down with a real GDP
The human cost of COVID-19 is huge.
COVID-19, the global pandemic, is fast turning into an economic epidemic. The world has changed dramatically over the last few months. The novel coronavirus pandemic has resulted in an unimaginable loss to the global economy, along with the loss of human lives.
Governments and health professionals are calibrating the response to this pandemic constantly, and frequent strategic adjustments are being made. The already slowing Indian economy is largely depended on expanded borrowing and non-tax revenue sources to work out reasonably sized stimulus packages.
We are now in lockdown, and the whole world is on the hunt for a vaccine to stop this virus and exploring effective medical treatments. Till the scenario is grim, doctors, scientists, and governments are working on an emergency mode.
Covid-19 pandemic impacts on Indian economy
Disrupted demand and supply
The Indian economy was slowing down with a real GDP growth rate of 4.7% in 3QFY20 even before the onset of COVID-19 pandemic in India and across the world. Although the 4QFY20 growth rate is also estimated at 4.7%, because of the deleterious economic and health effects of the COVID-19 pandemic, it may have to be revised significantly downwards.
As per Moody’s projection, India’s GDP growth would remain at 2.5% in 2020. ICRA has projected a growth of 2% for FY21. The economic impact of the COVID-19 will be a function of the magnitude and rate at which it spreads and how long it lasts within India and across the globe.
According to the Controller General of Accounts (CGA) data, during April-January FY20, gross tax revenue of center contracted by (-) 2.0%. The central government, in its Budget for FY21, had already relaxed the fiscal deficit targets from 3.3% of GDP to 3.8% in FY20 and from 3% to 3.5% in FY21.
In the March 2020 monetary policy review, the monetary policy committee (MPC) reduced the repo rate to 4.4%, which is even below the historic low of 4.75% in April 2009 after the global economic and financial crisis.
As per the estimates of The Asian Development Bank, the global economic cost of the virus is a whopping $2 to $4 trillion. As per the damages estimated by some legal firms, the figure goes up to an unimaginable $6.5 trillion.
Indian economy is being battered as well. Under complete lockdown, less than a quarter of India’s $2.8 trillion economy is functional. The estimated loss is expected to be over Rs 32,000 crore ($4.5 billion) each day during the lockdown.
Huge human cost
The human cost of COVID-19 is huge. In India, people with savings and access to shelter and food have managed somehow with difficulty. However, the impact on a large proportion of the 40 million migrant laborers, supporting India’s construction, agriculture and other sectors, has been very disturbing.
How can the Indian economy revive amid the Covid-19 pandemic?
Top priority – fight COVID-19
The first priority and the greatest challenge before us is tackling the effects of the COVID-19 pandemic. We have to defeat or neutralize the effects of the virus. Once we cross this particular challenge, all other battles can be handled. It is because of the early response and integrated approach of containment initiated by India that it has outperformed many other countries in slowing down the pandemic.
Our frontline – the healthcare sector
In early February, the private health sector came forward and started working closely with the public sector. E-training will be the next game-changer in expanding the boundaries of care. The leading organizations introduced online training for COVID-19. Healthcare professionals from around the world have joined these courses.
The next big need is testing. The testing has ramped up quickly all over the country, and more than half a million samples have been tested as of April 22.
Around 586 hospitals have been earmarked as dedicated COVID-19 hospitals across India. They have the capacity of over 100,000 isolation beds and 11,500 ICU beds reserved for coronavirus patients. Private sector hospitals also created dedicated negative pressure beds for COVID-19 patients. The extraordinary step taken by the Indian Railways is preparing train compartments to serve as isolation wards. Besides, hotel chains, corporate houses, and hospitals have partnered to convert hotel rooms into facilities for individuals who want to self-isolate and be in quarantine.
Finally, telemedicine found its place in India’s healthcare ecosystem. With the recent approval of guidelines for telemedicine by the central government, tele-consultation emerged as a godsend for patients who require consulting with their doctors, without going to the hospital.
Digital health, with its inherent potential to scale, becomes a great tool to manage the rising prevalence of non-communicable diseases and will help millions in need.
India’s frontline fighters led by doctors, nurses, paramedics, technicians, administration, and support staff have shown that they can rise spectacularly to the occasion. We all hope their valuable contribution will be able to erase the distrust in doctors and hospitals forever.
Get set, go
Next thing is to focus on re-booting the Indian economy. There has been a decline in India’s GDP growth rates over the past few years, and the problem has been further exacerbated by the COVID-19 pandemic.
Next year, the Indian economy is anticipated to languish in the 1% to 2% zone. When the crisis ends, and the economy starts running again, the first few countries to get off the starting block will be at an advantage.
COVID-19 crisis requires every government in the world to lend their industry a hand. India needs a high octane financial boost. As governments have taken a beating as far as tax revenues and foreign remittances are concerned, they will have to focus on those sectors that will deliver the biggest bang for the buck.
India will get up again
Our agricultural backbone accounts for almost 14% of our GDP and it can recover quickly and can even grow next year. But they require the support of logistics and storage. Good news is that the expected normal monsoon will help revive the sector maintaining its momentum.
The service industry, which is the number one contributor to our GDP, will start working again once the threat of the virus reduces. Most of the industries can also start their operation quickly with new work culture if they have the working capital and labor force back to restart their business.
The Micro, Small and Medium Enterprises (MSMEs) sector, which contributes to 30% of India’s GDP, is one of the key drivers of the Indian economy. At present, almost all MSMEs are out of action due to the lockdown. Neither MSMEs have the financial resources to restart their businesses, nor can they pay their employees. The government is contemplating a Rs 20,000 crore relief package for this sector.
The other sectors, including tourism, aviation, automobile, and real estate, also need help urgently. These sectors will put people back to work and help build some traction for the recovery of our economy.
The Prime Minister of India launched Self-Reliant India Movement with a special economic and comprehensive package of Rs 20 lakh crores – equivalent to 10% of India’s GDP and ‘Pradhan Mantri Garib Kalyan Package’ and other measures to cater to various sections including cottage industry, MSMEs, laborers, middle class, industries, among others.
To conclude, there is no easy fix to this unprecedented crisis. Presently, the most important responsibility for us is to get people safely back to work. It will only be possible when we can provide the best possible healthcare to our citizens. Our civilization has endured several crises in the past, which we have put behind us. We will overcome again, and this too shall pass!
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(About Author: Arindom is a professional writer, editor, blogger and a member of the International Association of Professional Writers and Editors, New York. A management postgraduate in finance with extensive industry exposure, he is associated with many reputed global online magazines and publications as a regular contributor. He loves to help his readers writing highly informative and well-researched investment-related content to make informed decisions.
The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of organization)