As of now, it’s quite understood that the Coronavirus outbreak is an unprecedented shock to the entire financial system. The virus that originated from China has gripped more than 200 countries globally. Several nations went into a complete lockdown state resulting in millions of job losses and major pay cuts, as many businesses got shut due to the outbreak. So far, there have been more than 2 Crore positive cases been reported worldwide, where the United States of America is the worst hit, followed by Russia and India.
As per the reports, millions have lost their job during the Coronavirus outbreak, taking the unemployment rate in America to 14.8%. In April, automobile sales were 49% low than the last year’s monthly average sales. Several small-scale businesses suffered an impact at large due to having less financial cushion.
Similarly, Russia also got affected by unexpected disruptions caused due to Covid-19 pandemic. The government had announced a complete lockdown on March 29 to prevent the spread of the virus. According to the statistics released by the Russian agency, around 4.5 million people lost their jobs. In fact, Russia’s industrial output dropped by 9.6%. The auto sector was also majorly hit by the outbreak, down by 42.2% in May.
Moving ahead, if we talk about the economic impact of the Covid-19 pandemic in India, there’s a lot to mention. India went into a nation-wide complete lockdown on March 24 for 21 days initially, which was then extended till May 3rd. During the lockdown phase, the unemployment rate reached almost 26%, hitting hard the entire Indian economic system.
Millions of laborers were left with no ration and shelter. They were helpless to walk miles barefoot as the entire transport mediums were closed and the state borders were sealed to prevent the spread of the virus. Thousands of shelter camps were set up by state governments for migrant laborers to prevent the exodus.
However, they were anxious to move on, and thus, soon the railway started ‘Shramik special’ trains to help labors travel back to their native villages. Railways transported more than 48000 migrant workers between May 1st to 27th through these special trains. Both Central and State governments funded transportation with a share of 85% and 15%, respectively.
Besides this, Prime Minister Narendra Modi had also announced a mega relief package of Rs.20 lakh crore to save the lockdown-battered economy, where Rs.1.7 lakh crore would go for the distribution of free food grains to the poor and cash to poor women and elderly.
Also, as businesses were severely affected, the Government declared collateral-free term loans to finance the working capital needs and minimize the economic impact of the Covid-19 pandemic in India. The loan amount would be backed by the government of India. This was a major relief to the business sector and a great opportunity to promote self-reliance (as our PM says, ‘Atmanirbhar Bharat’).
Impact on import and exports:
As India went into a complete lockdown in March, the domestic and international connectivity was also shut, resulting in a major drop in import and export by 36.65% and 47.36%, respectively compared to April 2019. In fact, following the militant dispute between Indo-China in the Ladakh region, the ‘Boycott China Products’ campaign gained momentum, which resulted in a major drop in import-export to/from China.
State income and expenditure:
As the huge economic impact of the Covid-19 pandemic in India is evident, the state governments too suffered huge losses during the lockdown phase. Respective state governments had to cut off the capital expenses and put future schemes on hold to cope with the Coronavirus outbreak. For instance, the Delhi government suffered tax collection by 90% compared to last year. Similarly, the Maharashtra government reduced the spending under development schemes by 67% for the current financial year. Madhya Pradesh government has witnessed a fall of income by 85%.
As soon as the country entered the unlock phase, companies re-started their operations, taking back the Indian economy on track. Although, most IT sector companies still preferred work-from-home operations as a precautionary measure. As per the survey reports, states like Punjab, Kerala, Tamil Nadu, Haryana, and Karnataka are contributing approximately 27% of the total GDP for the post-lockdown phase.
Duvvuri Subbarao, a former RBI governor, had said that India would have a V-shaped economic recovery as the nation returns back to work mode. Several sectors have kick-started their operations following the new-normal norms like social distancing, sanitization, and wearing a mask.