How Has COVID-19 Affected India?
Everyone has seen the grave effects of the COVID-19 pandemic over the entire world, be it the rich or the poor. Economists have predicted that the situation may be as severe as the 1920’s Great Depression. Job losses are greater than ever, and all sorts of unemployment are highly prevalent. The number of people contracting COVID-19 is still increasing and everyone is anxiously waiting for a vaccine. Given all this information, we will have a look at the effects of the pandemic in India.
The country went into complete lockdown from the end of the first quarter and it was extended until the end of May. The reversal of restrictions only began by part in June and the impact was undoubtedly enormous. The economy was down by 23.9% in the first quarter of the year 2020-2021 as compared to the previous year. This is because the manufacturing, construction, and retail sectors were hit badly due to COVID-19. The only sector which was revived was the agricultural sector. Its Gross Value Added (GVA) increased by 3.4 %.
The Indian economy had taken a wild downturn. Statistics showed that it was the most affected nation among the G-20 countries. This is India’s worst economic performance in the last 24 years. The National Statistical Office said that the contraction followed tepid 3.1% growth in the previous quarter was the worst performance in at least 8 years.
Prime Minister Narendra Modi announced an economic stimulus package worth $265 billion which would account for 10% of India’s Gross Domestic Product (GDP). Nirmala Sitharaman, the Union Finance Minister, then announced it in five tranches in May, covering the following:
1. Businesses, including micro, small, and medium enterprises
2. Poor, including migrants and farmers
4. New horizons of growth
5. Government reforms and enablers.
The opposition party leaders, though, have clearly stated that the new stimulus package is hopelessly inadequate, and undoubtedly its effects remain to be seen in the current situation.
The GDP is driven by four factors in India. They are shown below:
As it is evident, the GDP of India is largely driven by two factors: public spending and investment by businesses. These two factors have both gone down due to the epidemic as people are spending on only essential services and commodities. Accordingly, many businesses will stop investing in this epidemic. The fourth factor, i.e. net exports, comprises only 1%. Hence, the only way to revive India’s economy is by increasing government spending. The more the government spends, the more it will instil confidence in the people and businesses.
As Dr. Manmohan Singh, the former Prime Minister, and Finance Minister stated in his article, “The foundation for reviving our economy is to inject confidence back in the entire ecosystem. People must feel confident about their lives and livelihoods. Entrepreneurs must feel confident in reopening and making investments. Bankers must feel confident about providing capital. Multilateral organizations must feel confident enough to provide funding to India. Sovereign rating agencies must feel confident about India’s ability to fulfil its financial obligations and restore economic growth.”
He has stated solutions like providing cash assistance to laborers, reviving the health of the banking sector by providing them autonomy, restoring confidence among businesses with greater access to capital to help them create jobs, and borrowing as much as possible from the International Monetary Fund and World Bank. Adding on, the government can increase construction work during this period, which will certainly increase the employment of the unorganized sector.
Since the U-turn phases have begun since June, it remains to be seen whether it will have a V-shaped recovery as the Finance Ministry has noticed. This recovery will take much more time, or a second wave will dash all hopes and further deteriorate it.
Migrant Labourers and Rising Unemployment
According to the Guardian, India’s lockdown was one of the strictest in the world, which was possibly a good step considering India’s population. However, the overall management of migrant laborers was disappointing to watch. Generally, labourers reside in other states wherein they find a good amount of work, especially in metropolitan cities like Mumbai, Delhi, Pune, Bangalore, Kolkata, and Chennai. The sudden lockdown had a direct impact on them. There was no social distancing in the places they lived in and their source of income disappeared.
In the hopes of a 21-day lockdown, these labourers adjusted somehow. Though, after the government extended the lockdown, they became angry, frustrated, and wished to return to their native place. In many cities, the labourers staged protests and some even started walking to their homes in other states. In response, the central and state governments took various measures to help them. However, there was much delay in doing so and was only done after multiple people died on their journeys. In the meantime, many migrant workers died during the lockdown due to starvation, suicides, exhaustion, police brutality, and lack of medical facilities.
There was a loss of jobs in the informal sector due to the closure of factories and industries. The BBC recorded that distress caused by the lockdown and contraction of GDP in the informal sector would be far greater than the organized sector. Many job hirings were rescinded and there was even a hiring freeze for all sectors. The unemployment rate had reached an all-time high of 23.5% in April 2020, which fell to 11% in June 2020. By the start of August, unemployment had fallen to 6.47%. The unemployment, though, remains quite high in the youth sector and may reach to 32.5%, if the pandemic persists.
Impact on Education
The pandemic has brought a lot of uncertainty. This uncertainty was duly felt by students across all age groups in India. 10th and 12th exams had been postponed and later, grades were given on an average basis of marks scored throughout the year. Competitive exams The Joint Entrance Examination (JEE Mains) for Engineering and National Eligibility cum Entrance Test (NEET) for Medicine took place in the second week of September. One of the toughest exams i.e. JEE Advanced (a gateway for the coveted Indian Institute for Technology, or IIT) took place on 27th September. This, in a way, will delay their semesters and the universities will have to adjust term time accordingly.
Final year examinations for university students had all been postponed and took place around the month of September. This delay affected placements and some offer letters were revoked too, due to uncertainties. Surveys showed that around 60% of the students who were going to pursue higher education abroad, cancelled their plans or deferred them to Winter 2021/Fall 2021.
Despite all the negatives, the pandemic has increased the use of technology, with most lectures going online not only in India but around the world. IIT Bombay held its 58th convocation ceremony in Virtual Reality Mode. This wasn’t great for students, but it was revolutionary in terms of using technology.
These, according to me, are the main sectors which are fundamental to look at if one wants to restart the Indian economy and initiate trade in the market.
Swapnil Manglorkar is an intern at M74 and a supply chain enthusiast from Mumbai, India. He is passionate about technological changes going in the world and eager to learn more every day.
The views expressed above are those of the author and do not reflect the official position of the M74 Group, which remains neutral on all matters. Publishers assume no liability for content.