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Lenin once said that there are decades where nothing happens; and there are weeks where decades happen. We seem to be living in such a time now. Economies of the world are about to get ill from coronavirus viruses. The coronavirus is sending Indian economy into ICU. The buzz around the Indian economic slowdown has been going rounds for a long time. Indian Economy has been ailing with growth rates hovering at around 4.7% in the third quarter which is the six-year lowest growth recorded till date. Moody’s Investors Service on Friday slashed its estimate of India’s GDP growth during 2020 calendar year to 2.5 per cent, from an earlier estimate of 5.3 per cent.
The biggest employment-generating sectors of Indian economy — IT and IT-enabled services, automobiles, telecommunications, aviation, hospitality, travel and tourism — and even millions of small, local businesses are on the brink of crisis. The roots of the economic contraction are simple. There are a set of measures necessary to keep citizens healthy — social distancing, reduced mobility, work from home mechanisms, closure of public spaces and offices, ban or restrictions on travel. But the same measures slow down the economic engine. The economic impacts also have dramatic effects on the wellbeing of families and communities. India’s vast army of self-employed and daily-wage workers will perhaps be the hardest hit of all. For vulnerable families, lost income due to an outbreak can translate to spikes in poverty, missed meals for children, and reduced access to healthcare
According to a UN report, the trade impact of the coronavirus epidemic for India is estimated to be about $348 million and the country figures among the top 15 economies most affected as slowdown of manufacturing in China disrupts world trade. For India, the trade impact is estimated to be the most for the chemicals sector at 129 million dollars, textiles and apparel at 64 million dollars, automotive sector at 34 million dollars, electrical machinery at 12 million dollars, leather products at 13 million dollars, metals and metal products at 27 million dollars and wood products and furniture at 15 million dollars.
The Covid-19 outbreak could cost the Indian economy between $387 million and $29.9 billion in personal consumption losses, the Asian Development Bank (ADB) The Organisation for Economic Co-operation and Development (OECD) on Monday slashed India’s growth forecast for 2020-21 by 110 basis points (bps) to 5.1%, warning that the impact of the Covid-19 outbreak on business confidence, financial markets and the travel sector, including disruption to supply chains, could shave 50 bps off global growth in 2020.
Now there are signs that the virus is moving from traders’ screens to the real economy. It is not all doom and gloom. So far there are few indications—either from weekly jobless claims or from company announcements—that joblessness is rising. These will, in turn, be transmitted to the physical economy, further aggravating the recession and slow down activity. There will be multifarious losses
It is need of time to use prudently both liquidity measures and market interventions to rein in foreign exchange volatility without exhausting all the ammunition at one go Fiscal policy will be more important right now. The government will have to boost aggregate demand as production capacity comes back on stream once the shutdown orders are withdrawn. Hope the market anxiety will die down soon and the economy will take an upside.