COVID-19 Impact on Indian Economy and Economic Remedial Measures In Overall Context of World Economy

By Dr.V.V.L.N. Sastry

COVID 19 pandemic has devastated the global economy, and India is one of the countries that has felt the full economic devastation of the pandemic. The pandemic led to the losses of jobs of millions of people. It also led to the abrupt halting of the economic activities in various sectors. It affected both the industrial production and services sectors of the Indian economy. The impact of the pandemic on the economy is evident in the GDP growth of the country for the first quarter (April –June) and the second quarter (July- September) of the fiscal year 2020. The country has experienced for the first time consecutive periods of contraction of GDP, which made it fall into a recession economy for the first time. However, some of the blame of the adverse impact of the pandemic on the economy may be heaped on to the government. The government implemented policies have adversely aggravated the economic situation currently faced by India. In addition, the government did not implement effective measures to deal with the economic fallout of the pandemic. Since the pandemic is unique and faced by the world for the first time, the current study looked at the impact, and some of the measures that may expedite the recovery of Indian economy.

• Language: English
• Publisher: Bright & Young Publishers
• Release date: Jan 9, 2021
• ISBN: 9781393287520

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Abstract

COVID 19 pandemic has devastated the global economy, and India is one of the countries that has felt the full economic devastation of the pandemic. The pandemic led to the losses of jobs of millions of people. It also led to the abrupt halting of the economic activities in various sectors. It affected both the industrial production and services sectors of the Indian economy. The impact of the pandemic on the economy is evident in the GDP growth of the country for the first quarter (April –June) and the second quarter (July- September) of the fiscal year 2020. The country has experienced for the first time consecutive periods of contraction of GDP, which made it fall into a recession economy for the first time. However, some of the blame of the adverse impact of the pandemic on the economy may be heaped on to the government. The government implemented policies have adversely aggravated the economic situation currently faced by India. In addition,

the government did not implement effective measures to deal with the economic fallout of the pandemic. Since the pandemic is unique and faced by the world for the first time, the current study looked at the impact, and some of the measures that may expedite the recovery of Indian economy. 

Dedication

ABOUT THE AUTHOR

Dr.V.V.L.N. Sastry holds M.B.A (USA), LL.M (UK), ACMA (India), FCMA, CGMA (CIMA, UK), M.Sc. in Information Systems and Management from University of Roehampton, Ph.D. in Banking, Ph.D. in Computer Science, Ph. D in Financial Management, D.B.A from Calwest, and Ph.D. in Criminal Law and Public Policy from Walden University, U.S.A. Sastry brings over 20 years of experience in the banking, investment banking, software industry and law. He is the author of more than 1000 published articles on varied subjects in the areas of IT, Banking, Finance, Economics and Law. He also has authored several books in the said fields. Rated among the top researchers in the worldwide applied solutions, his research contributions are well received across the world.

ABOUT THE BOOK

COVID 19 pandemic has devastated the global economy, and India is one of the countries that has felt the full economic devastation of the pandemic. The pandemic led to the losses of jobs of millions of people. It also led to the abrupt halting of the economic activities in various sectors. It affected both the industrial production and services sectors of the Indian economy. The impact of the pandemic on the economy is evident in the GDP growth of the country for the first quarter (April –June) and the second quarter (July- September) of the fiscal year 2020. The country has experienced for the first time consecutive periods of contraction of GDP, which made it fall into a recession economy for the first time. However, some of the blame of the adverse impact of the pandemic on the economy may be heaped on to the government. The government implemented policies have adversely aggravated the economic situation currently faced by India. In addition, the government did not implement effective measures to deal with the economic fallout of the pandemic. Since the pandemic is unique and faced by the world for the first time, the current study looked at the impact, and some of the measures that may expedite the recovery of Indian economy.   

Acknowledgements

I am highly indebted to Dr. Edward Lambert, my Advisor for his guidance and constant supervision as well as for providing necessary information regarding the thesis & also for his support in completing the thesis.

I am thankful to Ms. Cyndy Dominguez, my Tutor; and Ms. Sandra Gracia, Admissions Counselor at Atlantic International University.

I have taken great efforts in this thesis. However, it would not have been possible without the kind support and help of many individuals and organizations. I would like to extend my sincere thanks to all of them.

I would like to express my special gratitude and thanks to industry persons for giving me such attention and time.

I would like to express my gratitude towards my parents & my thanks and appreciations also go to my son Master. Prabhat Shastri who has inspired me throughout my thesis process with his nice smile and also due credits to my other family members.

Signed 

V.V.L.N. Sastry

COVID-19 Impact on Indian Economy and Economic Remedial Measures in The Overall Context of World Economy

Chapter 1: Introduction

The outbreak of COVID 19 pandemic brought the world to a standstill in 2020. The World Health Organization (WHO) declared COVID 19 a world health emergency in January 2020. It subsequently officially declared it a pandemic, which is the highest level of health emergency, in March 2020. Since then, COVID 19 has evolved into a global health and economic crisis of untold proportions. The crisis has been unlike anything that has been experienced in this century. COVID 19 has affected more than 200 countries across the globe. COVID 19 started in China in the late 2019 and early 2020 before spreading to other parts of the globe. By early March 2020, focus had shifted from China to Europe, especially Italy. However, by April 2020, the U.S became the focal point of the pandemic as a botched response to the pandemic accelerated the rate of infections in the country (Kanitkar, 2020). By November 2020, more than 58 million people had been infected with COVID 19 with more than 480,000 fatalities. The U.S. has the highest infection rate with more than 12 million Americans being infected with the disease. By November 2020, more than 260,000 Americans had died from COVID 19. The U.S. is closely followed by India, which has more than 9 million infections. There are more than 44,000 fatalities in India.

The coronavirus pandemic has led to the contraction of the global economy. The global economy is expected to contract by 5.2% in 2020, which is the highest recession in decades. The COVID 19 pandemic is expected to plunge most countries into a recession in 2020. Emerging markets and developing economies are expected to experience a 2.5% contraction in their GDP, which would represent the weakest performance of the economies of this group in the past 60 years (PTI, 2020).The recession triggered by the COVID 19 pandemic is expected to have long lasting impacts through lower investments, erosion of human capital, and fragmentation of the global trade and supply chain linkages.

As the country with the second highest number of infections in the world, India has been adversely affected by the pandemic. The pandemic led to the introduction of strict lockdown measures in India to limit the spread of the disease. This led to a halt in many economic activities in the country.  This wreaked havoc to the Indian economy. During the first quarter (April-June) of financial year 2020-21, India experienced a 23.9% contraction in its GDP, which was the highest GDP contraction of any major Asian country during the pandemic. It is vital to note that the economy of India was weak even before the onset of the pandemic. The pandemic exacerbated the economic conditions of the country as manufacturing and construction were brought to a standstill due to the lockdown of the country.

Several sectors of the economy of India have been adversely affected by the COVID 19 pandemic. Tourism is one of the worst affected sectors of the Indian economy due to the COVID 19 pandemic. Tourism is one of the most important sectors in the Indian economy. In 2018, it accounted for 9.2% of the GDP of the country. It generated $247.3 billion and created 26.7 million jobs. Tourism is currently the 8th largest contributor of the GDP of the country. It is expected to provide approximately 53 million jobs by 2029. However, restrictions on international mobility have reduced tourism revenues. The World Tourism Council expects global tourism to reduce by as much as 25% in 2020 due to the COVID 19 pandemic. In so doing, it would put the jobs of 12-14% of the jobs in the sector at risk, which represents 50 million jobs. Travel and tourism account for 5% of the total employment in India with hotels accounting for an additional 4 million jobs. Since the late 2017, employment in travel and tourism industry had already been reducing. The COVID 19 pandemic exacerbated the decline in employment in the travel and tourism sector.

The impact of COVID 19 on unemployment is highlighted by the fact that in May 2020 it increased to 23% from 9% in March 2020. The unemployment rate was higher in urban areas than in rural areas. In June 2020, the unemployment rate reduced to 11% reflecting the economic impact of the first round of the relaxation of the lockdown measures. Nevertheless, the unemployment rate is still higher than the pre-lockdown levels (Dev &Sengupta, 2020).

Prior to the COVID 19 pandemic, firms in the private sector had been deleveraging in response to the twin balance sheet crisis. Firms with relatively good financial positions could overcome this crisis. However, several firms are struggling to survive in the aftermath of the twin balance sheet crisis. Most of these firms are expected to default on their loans due to consistent reduction in their revenues.

The countrywide lockdown instituted in the aftermath of COVID 19 led to the halt of almost all economic activities. This led to shifts in the demand and supply forces, which are expected to continue even