In India, 67,000 people have been infected with the COVID-19 virus and has caused the deaths of about 2200 people and counting. While the country as well as others all over the world has adopted preventive measures in the form of lockdown to contain the pandemic, the health of the global economy has been severely affected and an unfolding economic crisis seems inevitable due to the twin effects of the coronavirus pandemic and the lockdown.
In this context, the DOT Talks Webinar Series with Dr. Debabrata Sutradhar, Assistant Professor, Department of Economics, Tetso College sought to examine the overall health of the Indian economy and the various sectors affected by the COVID-19 pandemic.
Dr. Debabrata in his presentation stated that the International Monetary Fund (IMF) estimates India’s growth might slide to a meagre 1.9% or even less to 0.9% as per the Confederation of Indian Industry (CII) during 2020-21, owing to the 54 day lockdown which began on 25th March, 2020. This he said is because of the decline in production due to loss of employment which leads of purchasing power of the people, thereby resulting in decline of consumption.
The immediate impact of lockdown was reflected in the rise of unemployment rate in India from 8% to 24% as of 5th April, 2020 according to data provided by CMIE, Dr. Debabrata stated.
Speaking on the impact of the pandemic on the global economy, he said that it is projected to contract sharply by -3% and termed it as the most severe crisis since the Great Depression of 1930s. The economic loss to global GDP in 2020-21 could be around 9 trillion dollars, greater than the economies of Japan and Germany combined, and the world merchandise trade (import and export) is likely to decline by 13 to 32% in 2020, he added.
On the impact of the national lockdown on the agriculture economy which is the largest employment sector in the country, Dr. Debabrata pointed that the cycle of production and retail has been disrupted due to non-procurement of food grains and non-collection of harvest directly from the farms. Further, the scarcity of labour, truck drivers, highway blockages, and closure of food processing units as well as retail markets have disturbed the supply chain.
The Micro Small Medium Enterprises (MSMEs) which contributes to 30% of India’s GDP also took a big hit with the closure of factories across the country, affecting 111 million workers directly or indirectly, he said. Owing to this, India’s exports and imports trade declined by 30% in March 2020 as compared to March 2019 and the Tourism industry which supports 42,673 million jobs has been completely affected due to sealing of any kind of transportation, he observed.
Meanwhile taking cognizance of the effects on its citizens, the Government of India has put in place some relief measures in the form of economic packages. Dr. Debabrata stated that the government has reached out by addressing the immediate basic needs of the majority and vulnerable groups such as direct income transfers and food provisions. He also said that the Reserve Bank of India has announced liquidity measures along with policy furnish special refinance facilities to NABARD, SIDBI and NHB, and cut policy lending rate by 75 basis points in a single move this year. The cash reserve ratio has also been reduced to 3% from 4% in March, he added.