Will Coronavirus Lockdown Leave The Indian Economy Crippled?

With more than 2,600 positive cases of coronavirus reported and over 68 deaths as on April 4, India is now struggling to contain the fatal virus.

Condition in India after lockdown

Prime Minister Narendra Modi announced nationwide 21 days lockdown starting from March 25, to prevent the community spread of the virus.

A nation consisting of 1.37 billion population, is now counting the days for the quarantine to get over. As many people worry about their job and others worry about their survival due to lack of availability of food and other essential supplies.

Out of the total population, almost 94 per cent are employed in India’s unorganised, informal industries, and this contributes to 45 per cent to its overall output.

Relief Package by the government

Considering this fact, the Indian Finance Minister Nirmala Sitharaman, 36 hours after the Prime Minister declared the lockdown announced Rs. 1.7 lakh crore worth relief package to sustain the weaker section. While announcing the package, she stated that “No-one will be allowed to go hungry.”

The relief package is a combination of direct cash transfer benefits to individual bank accounts and food security measures.

However, the economic fallout of this unprecedented lockdown has been dreadful. Businesses have closed, with thousands being unemployed overnight, and productivity has fallen; as a result, the whole economy shows a downward trend.

Result of lockdown

India’s growth engine was actually stumbling well before the threat of outbreak arrived. Once one of the fastest-growing economies in the world, its growth slowed to 4.7 per cent last year – the lowest level in the past six years.

If we take the case of unemployment, it was at its highest level last year since 1972-1973 (45-year). The industrial output from the eight-core sectors at the end of last year fell by 5.2 per cent – the worst in 14 years.

Small businesses had only just begun to recover from the controversial 2016 currency ban (demonetisation) that came as a blow to the cash-consuming informal economy.

Now, experts state the coronavirus outbreak is likely to cripple the already sick economy further.

So, while people quarantined welcomed the government’s relief package announcement, several measures are yet to be taken to reduce the effect of the pandemic on the economy.

However, the question which is still unanswered is–how the government is going to pay to people who don’t have a bank account? How far will this distribution be effective?

State of Indian farmers after lockdown

If you think that lockdown has affected the industries alone, then you are WRONG. India being an agriculture-based country, wherein more than 50 per cent of the population depends on agriculture, farmers are also vulnerable to a potential economic shock from the lockdown. This very same agriculture industry contributes around 15 per cent of the total GDP of India.

The government have announced that it will give farmers Rs 2,000 in April as an advance payment from Rs. 6,000 annual pay-out to cope up with the situation. However, this money is inadequate as the export have entirely stopped due to lockdown.

Furthermore, experts say that prices in the urban area will rise because of profiteering and in rural areas, it will drop because farmers won’t be able to sell their crop.

Impact of lockdown on other sectors

The outbreak and lockdown have come untimely as it is the critical farming time where the new crops are set to be sold in the market.

Economist warns that amidst the lockdown, it will be challenging for transporting these farm products from villages to cities. If the supply chain does not work suitably, there will be a colossal waste of food leading to a massive loss for farmers.

Experts caution that India is also at the rim of a major unemployment crisis. Employees will either have to bear the salary loss or lose their job or both. However, this situation will be seen mostly in the small business organisation.

Apart from this India’s fast-growing aviation industry, will also be pushed to peril as the flights are suspended until mid-April. The Centre for Asia Pacific Aviation (CAPA) has estimated that the Indian aviation industry will have to bear a loss worth nearly 4 billion dollars this year.

This will further have a cascading effect, on the hospitality and tourism industries. Hotels and restaurant chains across the country are likely to remain shutdown for a while, sparking concerns of large-scale layoffs.

The automobile industry a vital indicator of a country’s economic growth, has also been forced to kick the brakes – experts are expecting a loss of nearly 2 billion dollars.

What should the government do?

Experts say that the government should devise a way of using the army and state machinery to physically distribute food to the poor.

As there are thousands of migrants employees who are stuck in other parts of the country far away from their hometown, the government need to take the seamless distribution of cash and food at top priority.

So will this relief package be enough?

Experts say that it is like a drop in the ocean compared to the aid provided by countries such as the US, China and Singapore. They further say India now needs a larger stimulus package soon to help businesses and farmers to withstand this unusual crisis.

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