The economic impact due to COVID-19 pandemic in India has been largely disrupting and alarming. Growth in the fourth quarter of the financial year 2020 in India went down to 3.1 per cent. Notably India had also been witnessing a pre-pandemic slowdown, and according to the World Bank, the current pandemic has “magnified pre-existing risks to India’s economic outlook”.  The World Bank and rating agencies had initially revised growth for FY2021 with the lowest figures since India’s economic liberalization. However after the announcement of the economic package in mid-May, GDP estimates were downgraded even more to negative figures, signalling a deep recession. State Bank of India research estimates a contraction of over 40 per cent in the GDP in Q1 FY21. The contraction will not be uniform, rather it will differ according to various parameters such as state and sector. Within a month, unemployment rose from 6.7 per cent on 15 March to 26 per cent on 19 April. Dauring the lockdown, an estimated 14 crore people have lost employment. More than 45 per cent of households across the nation have reported drop in income as compared to the previous year. The Indian economy was expected to lose over ₹32,000 crore every day during the first 21-days of complete lockdown. Up to 53 per cent of businesses in the country were projected to be significantly affected. Supply chains have been put under stress with the lockdown restrictions in place; initially, there was a lack of clarity in defining essential commodities. At the same time those in the informal sectors and daily wage groups have been at the most risk. A large number of farmers around the country who grow perishables also faced uncertainty due to closure in the supply chain. Major companies in India have temporarily suspended or significantly reduced operations. Fast-moving consumer goods companies in the country have significantly reduced operations and are focusing on essentials. The Government of India has announced a variety of measures to tackle the situation, from food security and extra funds for healthcare and for the states, to sector related incentives and tax deadline extensions. The different phases of India’s lockdown up to the “first unlock” on 1 June had varying degrees of the opening of the economy. On 17 April, 2020 the Governor of RBI announced more measures to counter the economic impact of the pandemic including ₹50,000 crore special assistants to different agencies. On 12 May Government of India has also announced an overall economic package worth ₹20 lakh crore, which is 10 per cent of GDP, with emphasis on India as a self-reliant nation. Therefore, there is a big challenge to India in the coming days to fight against the economic crisis which was largely disrupted due to COVID-19 pandemic all over the world.

Economic Affairs, Quarterly Journal of Economics| In Association with AESSRA

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