India after the end of coronavirus pandemic

Abhishek Ranjan.
The pandemic is a world-shattering episode or rather we say an occurrence whose far-ranging repercussion we can only begin to imagine today. It has occurred at a time when the world was already sailing through troubled waters – slowing economies, depreciating currencies, loss of employment, and so on. India, which was already going through its longest spell of GDP decline in almost three decades, is far from flattening the curve. Being the second-largest populated country and a developing economy India is in great danger with this pandemic. But as we have seen so far, due to governmental control and the mass contribution of the population the situations have not been worse. Keeping in mind the recession crisis of 2008 in India which was recovered, but the difference was that in 2008 the businesses were running, unlike this time. India had problems before the pandemic. The growth rate of income was heading to 4%, the credit market was broken, and a lot more.

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Now due to the corona crisis, a recession phase is starting to take place in the economy. The recession is due to three types of shocks- massive supply chain inefficiencies, dipped consumer demand, and crashing global stock markets. The problem with covid19 is that it causes all these three together. The real problem is the decrease in consumer spending and aggregate demand. The scarcity of resources to support business will amplify the corona induced shock in India. One of the worst-hit sectors is apparel and textiles, which employs over 45 million of the population. Even Agriculture which contributes to about $265bn in India and employs about 60% of the economy is getting seriously impacted at this critical time when the crop is ready to and sold. Other sectors like Real estate, Banking, and Automobile are also affected. This led to serious impact the common folks, as the unemployment level was already at the 45-year high and now due to this pandemic it will only start to increase further

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This pandemic is increasing the government tension and its pressure to make the economy stable, it is also draining out a lot of income from the Economy. Moody’s slashed India’s growth to 2.5%from 5.5% for 2020 and this rate may even reduce further. China is India’s largest source of import. As a result, delay in imports from that country or additional customs duties will lead to a shortage of both raw materials and intermediate goods for Indian companies.

Life is greatly affected by this corona pandemic. The lockdown situation created by the majority of the country has made the lives of common men a mess. In the case of India, there is a majority of the middle class and below middle-class groups, these groups are affected the most. The daily wage workers are the most to be affected. Due to the lockdown, they have lost their daily bread. Our government, as well as local people, are trying to help these daily workers to some extent. The salary workers are in a vicious cycle of fear that whether the country’s employment will be able to sustain them or the other way. The small business people have no current income and huge spending during this crisis which leads them in a big pandemic of their own. The absence of market activity will directly and adversely impact these vulnerable people and their families. The Union and state governments have made appeals to the private sector to not lay off or cut the salaries for the workers during this time of crisis. But still, there are people who are suffering due to the salary cut or high rent payment, etc. longer this lockdown will go on more will be the suffering. At the household level, struggling families will increasingly see breadwinners lose their jobs or be forced to sell productive assets in order to survive. For the children, the longer schools remain closed, the less likely children are to catch up on learning and essential life skills that support a healthy transition to adulthood. As there are many students whose career is at risk due to this lockdown. The government is taking all measures to avoid all these crises by conducting online schooling, creating a safe platform for students to learn. The urgent securing of food supply chains and local food markets, to protect children from a food security crisis.

पीडीएस दायरे से बाहर के गरीबों के लिए खुली बिक्री योजना से अनाज खरीदें राज्य: पासवान

The Indian government is already doing the best they can to help the population economically. India is close to finalizing a second economic relief package that may include tax concessions for industry sectors hit hard. The government will need to take steps to protect those most vulnerable to COVID-19, such as those with prior conditions or without insurance. The government could consider depositing cash on a monthly basis for the foreseeable future. Targeted aid can be given to the weaker section of the society. The central bank should be ready to provide ample liquidity to the bank and non-bank sectors, especially to the ones who are lending to the small and medium scale entrepreneurs. The government can use this opportunity to work closely with the Reserve Bank of India (RBI) to ensure that the necessary fiscal stimulus is supported by the further loosening of monetary policy. A lot has already been done by the RBI and the Government but more is to be needed. The monetary policy has already been applied as the RBI has already lowered the interest rate and increased the money supply. And now the Fiscal policy is to come in more action in which the government cuts the taxes or increases the spending, which it has started too. The economy really needs are the fiscal measures to save the companies and banks from bankruptcy. The most promising option is a short-time work allowance, it is a tested measure by Germany to reduce its unemployment. Better yet, it costs hardly anything, because it prevents the losses that would follow from increasing the real unemployment.

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As factories and shops will start to reopen, it seems to be over the initial supply-side shock caused by the lockdown. But Domestic demand will be slow to gain traction due to psychological scars, bankruptcies, and job losses. As shown in a survey conducted by a Beijing financial firm, China. Relax taxes, immediately start releasing funds, bailout packages for Bancorp sectors, rearrange supply chains etc are some of the measures that can be taken up by the government to fight this recession period.

The pandemic will lead to permanent shifts in political and economic power in ways that will become apparent only later. The whole world economy had created an interconnected financial system that seemed efficient and was perhaps good at absorbing small shocks, but it was systemically fragile. If not for massive government bailouts, the system would have already collapsed. The government’s help and constant communication with the public has led to a low panic situation in our country. The government should attract more foreign work towards our economy to improve the impact. As China is the largest supply for raw and intermediate material the work forms the country can be withdrawn by many countries, this can be an opportunity for India to take those exports and lift the economy back.

This pandemic situation is a boom in the whole world economy but as many economists have said that, the Indian economy could be better than others as it is less dependent on export that means it won’t suffer globalization which is put on reverse gear and new trade barriers will be imposed. To add a silver lining in the pandemic, with global economies expected to adopt de-risking strategies, they might shift their manufacturing bases outside China, thus creating exciting opportunities for India. Many economies are expecting a V-shape economy where a sharp decline will lead to a sharp growth. Which could be expected in India too. There could be a prolonged decline even after lifting the lockdown as the masses relive with uncertainty will be reluctant to spend money. Despite the bleak future ahead, the United Nations Conference on Trade and Development (an intergovernmental body) believes that India might be one of the two “major economies least exposed” to a global recession. In fact, analysts also believe that India’s economic recovery will be “smoother and faster than that of many other advanced countries”.