The World Bank on 12th April, said the coronavirus outbreak has severely disrupted the Indian Economy. In its South Asia Economic Update: Impact of COVID-19, the World Bank estimated the Indian Economy to decelerate to 5% in 2020 and projected a sharp growth deceleration in the fiscal 2021 to 2.8% in a baseline scenario. The report also says that COVID-19 came at a time when India's economy was already slowing due to persistent financial sector weakness. But ever since the lockdown has been announced, the economy is in the new low.
"Suddenly there were no buyers. Big retailers, restaurants and hotels all closed down and household demand dipped drastically because many feared that vegetables are handled by too many people", Kamal Yadav, a farmer from Harayana narrated his story. The demand has been very low since the lockdown. The supply chain has also been badly hit due to restrictions. The acute shortage of labour has been posing many problems for farmers after we witnessed reverse migration at its highest since the month of March.The Agriculture sector accounts for just 15% of the country's GDP, but it employs nearly half the workforce (source: Financial Times). The lockdown almost coincided with the harvesting of rabi crops. In Punjab, Haryana and Western Uttar Pradesh, it is mostly wheat, since there is little diversification. But in Maharashtra, Madhya Pradesh, and Gujarat, in addition to wheat, there are also pulses like gram, masoor and moong which are also grown in the rabi season. The harvesting in these states is in the latter part of March and early April. Last year, UP’s procurement was 3.7 million tonnes and Bihar was just 3,000 tonnes. While Punjab manages to procure 100 percent of the produce, in Bihar, not even 5 percent goes through the same process. Much of Bihar’s produce is sold outside in the free market, and that too, below the MSP (the quint). This is a clear indication of the non-uniformity of MSPs in different states and added to it the conditions have been worsened due to corona times.
The Indian Industries have seen the negative fallout as well. Industrial production declined 16.7 percent in March 2020 as against 2.7% in March 2019, the Government of India declared on Tuesday, 12 May. The output of India's eight major industries had crashed in March 2020 by 6.5 percent from a rise of 7.1 percent reported in February 2020, IANS had reported. The massive magnitude of March’s fall was also evident on a year-on-year basis. The Index of Eight Core Industries had risen by 5.8 percent in March 2019. The eight core industries include coal, crude oil, natural gas, refinery products, fertilizers, steel, cement and electricity. As per the ECI, barring crude oil, natural gas and steel, all other sectors expanded in February. The ECI comprises over 40 percent of the weight of items included in the Index of Industrial Production (IIP). MSME sector has almost come to halt not only because of the domestic lockdown but because of the disruptions in the global supply chain as well. For instance, China is an important country when it comes to supplying raw materials to the majority of the MSMEs in India. According to a study commissioned by All Indian Manufacturers Organization(AIMO), Indian is currently home to 75 million MSMEs and close to 25% of them are on the verge of closure. The sector which provides employment to over 114 million people can prove to even darken the sector if the situation persists.
The trade scenario has crumbled too due to the pandemic. According to a recent UN report, the trade impact of the pandemic for India is estimated to be about 348 million dollars and the country figures among the top 15 affected economies. For India, the trade is estimated to be the most for the chemicals sector at 129 million dollars, textile and apparel at 64 million dollars, the automotive sector at 34 million dollars, electrical machinery at 12 million dollars, leather products at 13 million dollars, metals at 27 million dollars and furniture at 15 million dollars. These sectors have almost surrendered due to the global restrictions in trade.
The sound of the crippling of the economy can be easily heard. No sphere has been spared with the impact of the novel virus. Is this just the beginning? If it's a nod then certainly worse is yet to grip in and we got to be prepared.