HOW INDIA RESPONDING TO ECONOMIC CRISIS DURING THE COVID-19 PANDEMIC

Abstract

The lockdown in India got extended to 31st May, making this lockdown phase more than 55 days. This pandemic has pushed the Indian economy into a recession, due to which the economy starts shrinking and growth of market stops.This lockdowns forcefully confined millions of people to sit to their homes, shutting down most of their businesses and ceasing all economic activity in India. Due to loss of jobs, businesses, import-export every business is facing a great downfall in their income which is affecting overall economy and records the worst performance of India since 1991 liberalisation this FY-21 due to the outbreak of Corona Virus severely disrupts the economy.[1]

Introduction

The Corona Virus Pandemic is very deadly and need to be contended as early as possible. Whereas lockdowns only stop the disease from spreading, and will not eradicate it.Thus, Pandemic is affecting the Indian Economy and is expected to lose $4.5 billion every day during the period of lockdown.[2] Indian government has proposed a range of methods and steps to resolve the crisis, ranging from health sector funds and food security to sector-related incentives and extensions of the tax deadlines.The lockdown has restricted supply chains in the market and now there is a lack of clarity in the market what are the “essential” is and what are not.

Lockdown brought the economic growth to a grinding halt and shut down the businesses. Centre for Policy Researchis trying to look on the impact on the labour force participation,unemployment rate, and the overall income of businesses and individuals. Tamil Nadu estimated unemployment is highest among all the States and lowest in its labour participation.[3]This is risking the life of workers who are working in informal sectors or for the daily wages in different states. All State and other officials are doing their best and hard to compensate for the country’s everyday wage-earners and financially poor families.

Actions Taken By Government

The sectors of construction, services and finance will be affected and will be in deep distress. In addition to this sectors, banking which is still dealing with a bad loan crisis, insurance firms can see their company become unprofitable depending on the claims made when the Corona Virus will be settled.However, this lockout will also affect the power of supply in the market. The rapid shortening of production and distribution ensures that all kinds of shortages will arise fairly early. Due to which Finance Minister, Nirmala Sitharaman declared a $23 billion package to mitigate the turmoil.[4]The “Atmanirbhar Bharat Abhiyan” package, to provide increase in credit, bank guarantees and collateral free loans that would allow resumption of work for companies to avail benefits of MSME schemes.[5]Also, India’s central bank is also helping to fight with dramatic interest rate cuts and a slew of unorthodox initiatives aimed at making loans available to downtrodden businesses. “One Nation One Ration Card” scheme was emphasized by Finance Minister for giving economic relief packages to Migrants, farmers and street vendors and housing for labours, poor and migrants who are travelling through states.[6]

There are number of economic relief measures are being provided by the government for the poor totalling over more than Rs.1,70,000 crore. As everyone is trying to resolve crisis, the Reserve Bank of India (RBI) also announced some measures which will help the country’s financial system and make available Rs. 3,74,000 crore for that. The government allowed the movement of all essential as well as non-essential goods during the lockdown i.e. vegetables, fruits and dairy products. The central government is now allowing states to release their funds for tackling the pandemic totalling more than Rs. 28,379 crore. Moreover, Asian Development Bank and World Bank have approved support to India to tackle the economic crisis during coronavirus pandemic.

The Prime Minister of India has extended the lockdown for the fourth time with new set of guidelines for opening of the economy and relaxation to everyone in the lockdown were also set in place. The government announced a total financial plan worth approximately 20 lakh crore, or 10% of Indian GDP, with an emphasis on India as a self-reliant country.[7] Moreover, India needs to be a self-reliant country during this time and should try to buy locally produced goods “vocal about local”. “Made in India” is likely to be an important factor shaping purchasing decisions and for the vocal for local campaign.

Conclusion

The spread of deadly coronavirus and unplanned lockdowns has created chaos in the lives of millions of people who are part of the informal sector and freelance economy employees too and is in harsh contraventions with the human rights sectors in a way as the people especially the migrant workers who are left in astray outside their hometown areas and are not given any opportunity to reach their homes as the measures made by the governments are not sufficient in respect of this sphere and this in the long run according to the observation it will deeply influence the employment in this sector as many people from these sectors and this has caused the workers to migrate increasing radically the rate of covid-19 in India and this has become one of the main reasons for India having more number of coronavirus patients than China the epicentre of this virus itself.

The response so far from the government has been both stringent and inadequate. The limits on movement and economic activity must be enforced with conviction, but with more empathy and knowledge of most Indian’s living and working conditions, as well as understanding of the economic harm it would inflict.The macroeconomicsnow concern more on to normalize a free-falling economy that requires measures for sustaining certain demands as well as supply.

References

  1. PTI, World Bank sees FY21 India growth at 1.5-2.8%, slowest since economic reforms 30 years ago, The Hindu, (April 12, 2020), https://www.thehindu.com/business/world-bank-sees-fy21-india-growth-at-15-28-slowest-since-economic-reforms-30-years-ago/article31322011.ece#
  2. Covid-19 lockdown estimated to cost India $4.5 billion a day: Acuité Ratings, The Hindu BuisenessLine, (April 02, 2020) https://www.thehindubusinessline.com/economy/covid-19-lockdown-estimated-to-cost-india-45-billion-a-day-acuit-ratings/article31235264.ece
  3. The Hindu Data Team, Data | An estimated 12.2 crore Indians lost their jobs during the coronavirus lockdown in April: CMIE, (May 07, 2020), https://www.thehindu.com/data/data-over-12-crore-indians-lost-their-jobs-during-the-coronavirus-lockdown-in-april/article31520715.ece
  4. Jayati Ghosh, Indian economy was rolling down a hill. With Covid-19, it’s falling off a cliff, Quartz India, (April 02, 2020), https://qz.com/india/1830822/coronavirus-may-push-indias-struggling-economy-off-the-cliff/
  5. Explained Desk, Explained: How Covid-19 has affected the global economy, The Indian Express, (May 16, 2020), https://indianexpress.com/article/explained/explained-how-has-covid-19-affected-the-global-economy-6410494/
  6. Stela Dey, ‘One Nation One Ration Card’ For Migrants, Says Nirmala Sitharaman: Highlights, NDTV, (May 14, 2020), https://www.ndtv.com/india-news/nirmala-sitharaman-announces-economic-package-break-up-on-day-2-highlights-2228773
  7. FE Online, Nirmala Sitharaman Highlights: Govt strengthens India’s agri, allied sectors supply chain; major export push too, Financial Express, (May 15, 2020), https://www.financialexpress.com/economy/fm-nirmala-sitharamans-third-phase-of-announcement-on-economic-package-today-at-4-pm-agri-infra-reform-ltcg-ddt-tax-cut/1959660/

[1] PTI, World Bank sees FY21 India growth at 1.5-2.8%, slowest since economic reforms 30 years ago, The Hindu, (April 12, 2020), https://www.thehindu.com/business/world-bank-sees-fy21-india-growth-at-15-28-slowest-since-economic-reforms-30-years-ago/article31322011.ece#

[2]Covid-19 lockdown estimated to cost India $4.5 billion a day: Acuité Ratings, The Hindu BuisenessLine, (April 02, 2020) https://www.thehindubusinessline.com/economy/covid-19-lockdown-estimated-to-cost-india-45-billion-a-day-acuit-ratings/article31235264.ece

[3] The Hindu Data Team, Data | An estimated 12.2 crore Indians lost their jobs during the coronavirus lockdown in April: CMIE, (May 07, 2020), https://www.thehindu.com/data/data-over-12-crore-indians-lost-their-jobs-during-the-coronavirus-lockdown-in-april/article31520715.ece

[4]Jayati Ghosh, Indian economy was rolling down a hill. With Covid-19, it’s falling off a cliff, Quartz India, (April 02, 2020), https://qz.com/india/1830822/coronavirus-may-push-indias-struggling-economy-off-the-cliff/

[5]Explained Desk, Explained: How Covid-19 has affected the global economy, The Indian Express, (May 16, 2020), https://indianexpress.com/article/explained/explained-how-has-covid-19-affected-the-global-economy-6410494/

[6] Stela Dey, ‘One Nation One Ration Card’ For Migrants, Says Nirmala Sitharaman: Highlights, NDTV, (May 14, 2020), https://www.ndtv.com/india-news/nirmala-sitharaman-announces-economic-package-break-up-on-day-2-highlights-2228773

[7]FE Online, Nirmala Sitharaman Highlights: Govt strengthens India’s agri, allied sectors supply chain; major export push too, Financial Express, (May 15, 2020), https://www.financialexpress.com/economy/fm-nirmala-sitharamans-third-phase-of-announcement-on-economic-package-today-at-4-pm-agri-infra-reform-ltcg-ddt-tax-cut/1959660/

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