COVID-19 and the Great Indian Economic Crisis
As the novel coronavirus (n-CoV) continues its rampage across the country with no signs of slowing down, the Indian economy cripples further, even after two months of slowly easing the lockdown. The wait for a vaccine grows longer, and countries compete in the race to come forward with positive results in the human trials, the world economy has taken a hit with the Indian economy being no different.
A decrease of as much as 7.5% in the Indian GDP in the fiscal year 2020-21 (FY21) is expected, as stated by a foreign brokerage.
Industrial manufacturing shrivelled to 34.7% in May, stop April’s 57.6%, bringing the Q1 GDP to be reduced to a measly 18% as stated by many finance analysts.
Developing businesses have been one of the hardest hit due to the pandemic. As per the Stanford Social Innovation Review, the COVID-19 disaster is specially threatening small and growing businesses (SGB’s) in developing countries.
When a nationwide lockdown was imposed fuel sales had fell by a record 45.8% in April. S.K. Gupta, Indian Oil Corporation (IOC) Director (Finance) said, “It may take six to nine months to return to normal.”
The Finance Ministry said that the increasing number of cases and local lockdowns in the states have made healing prospects “fragile” for India’s economy.
According to reports, the Reserve Bank of India (RBI) is expected to reduce rates by 0.75% in FY21 as a base case, as the Centre’s economic deficit will come at 6.85% of the country’s GDP in opposition to the budgeted 3.5% bringing the overall fiscal deficit to 10.7%. The RBI will also cut interest rates by 2 percentage points in FY21.
The IMF has predicted that India will have a growth rate of -4.5% in 2020, the lowest growth rate, since 1979.
Unemployment rates reached a shocking 23.5% in May, India’s hasty lockdown has done more harm than benefit the citizens. Both production and consumption have been hit hard, the current trends don’t indicate much improvement and recovery may be a long and tiring process.
India’s lockdown was supposedly the most stringent in the world. As the government expected the public to grapple and prepare with the news of a nationwide lockdown with a four-hour notice, it was expected that the government had a plan but there was no proof of any of those ancillary actions.