Covid-19 disease commonly known as corona disease is an infectious disease, caused by a virus known as severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2). The first case of this disease was found in Wuhan, China from where it started spreading globally and it became an ongoing pandemic. It is a disease which spreads among people when they come in close contact, via small droplets when they cough, sneeze and talk. Till now there is no cure available to this disease, scientists from all over the world are engaged in preparing vaccine, right now preventive measure like social distancing, usage of hand sanitizers and usage of masks are being adopted to prevent the spread of this pandemic.
Government of India in order to ensure that social distancing in maintained, announced nation wide lockdown on 24th March 2020, which brough an halt in the economy and the lives of the people. Since then all the economic activities in India are shut except those of essential commodities. It snatched away the jobs of millions and left all of them unemployed. It emptied away the savings of lakhs of people. And it brought poverty.
Economic Conditions before lockdown
Before the outbreak of this novel coronavirus the Gross Domestic Product (GDP) of the country was 3.202 trillion USD, and the growth rate was 4.7% which now is reduced to 2%. International Monetary fund had projected that Indian economy will grow by 5.8% in fiscal year 2020, but this pandemic outbreak it has downgraded the projection to 1.9%. Before the outbreak of this virus no sector of the economy was affected other than Equity Stock Market. Before the outbreak, the two important indices of Indian Stock Market SENSEX and NIFTY had hit their record low in the past 7 years, both of them fell 15-20%. Moreover, foreign trade was affected, trade with all the corona affected countries were stopped. And air travel was affected. Every other thing was functioning as normal.
Economic conditions during lockdown
It was at this stage our economy was hit very badly. All the economic activities happening in the country were completely stopped except that of essential services and commodities. Air travel and railway services were also stopped. Due to this shutdown labours working in the factories and construction activities were thrown out of their jobs and they all were left unemployed, poverty rose. Due to the shutdown and there was a rise in the demand, prices of the goods and services rose, which lead to the inflation, decreasing the purchasing power of the money. The worst hit sectors are the tourism industry, aviation industry and e-commerce.
With the increasing risk of spread of this disease government put restriction on travelling. People were asked not to plan any trips and pre-planned trips were also cancelled, as a result travel industry and hotel industry also suffered losses simultaneously. All the pre-booked tickets and rooms were cancelled. As the tourism died government lost its major source of revenue. The hotels didn’t have enough funds to manage the hotels, maintain them, so they fired employee, they lost their jobs.
The aviation industry also faced a worst hit, the airline companies had to cancel all the flights, refund the ticket prices. Even if they are not operating, they have to pay the pilots and the crew members, they also have to pay aircraft parking fees to the airport, which is a main burden to the companies. They have to spend huge amount of money on the maintenance of the aircraft.
India railways which makes around 2500 crores in a day, their operations were also stopped, due to this many of the people were struck in the different parts of the country, away from their homes. Railways was asked to cancel all the tickets and refund the amount to the passengers. Even here government lost it major source of revenue.
As a result of lockdown all the shopping complex, shops and establishments are closed and they aren’t paying any form of tax, which again is the loss to the government.
The government in order to support the people and help the people gave them the time of 3 months to pay their emi’s and other instalments of the loan taken. To support the weaker sections of the society government deposited the sum of 500 rupees in their respective bank accounts.
After the completion of first lockdown the government imposed two another lockdown, but in these lockdowns certain relaxations were granted. The entire country was divided into three zones red, orange and green. Red zone is the one which is hotspot, orange zone is one which has corona positive cases and green is one which has no single corona case. The economic activities were resumed in the orange and the green zones with the condition that social distancing will be maintained and there will be proper usage of masks and sanitizers.
During these relaxations, all the shops dealing with the commodities on which the taxes are high taxes are imposed were open. Even all the liquor shops all around the country were opened because the tax charged on liquor is very high. State government made crores of money on this day. Special charges are charged on liquor these day, New Delhi charges 71% corona tax on liquor. This became the main source of revenue for the government.
State government in order to generate more revenue increased VAT charges on petrol and diesel. The prices of petrol and diesel went up by almost 10-15 rupees each litre, even when the global crude oil prices are falling. During the lockdown the global crude oil prices went to negative, even then the government raised the prices, so as to generate revenue.
With all this cons corona brought a lot of opportunities to India, all the pharma companies present in the India invested crores of rupees in their R&D to prepare the vaccine to fight against corona. The manufacturing of PEP kits started in India and currently two lakhs PEP kits and N95 masks are being prepared in India. For the first time in India various schools and Colleges adopted online learning. Various online entertainment and streaming platforms got wonderful business opportunities. As the trend of work from home started even the telecom operators got a great business opportunity as Internet is needed.
In order to bring back economy back on track, our honourable Prime Minister Shri.Narendra Modi pressed on the concept of self-reliance and vocal for local, so as to promote indigenous goods. He also announced the economic reform policy of 20 Lakh Crore, 10% of Indian GDP to revive the Indian economy.
The sum of 20 Lakh crore will be released in small instalments, the first instalment of 6 lakh crore was released on 13th may, this sum was invested into various sectors, three lakh seventy thousand crore was pushed into MSME’s, seventy five thousand crore was invested in finance sector, fifty nine thousand and two fifty crores to help business and workers and the huge sum of ninety thousand crores was invested in discoms sector.
The MSME’s were given collateral free loans, 50000cr was infused through funds of funds to standard MSME’s. This will help them to expand their capacities. Government also mentioned that all central government outstanding will be cleared within 45 days to help the businesses. EPF payment by government was extended by another 3 months, government to pay 12%+12%. Government also reduced EPF to provide more in hand salary. Further to help the citizens directly, non-salaried TDS and TCS rates were reduced by 25%, ITR filling dates were extended to 30th NOV, Tax audit date was also extended to 31st October.
All these steps were undertaken with the first instalment of 6 lakh crore, the fund of 14 lakh crore is still left for the welfare of the people and the business organisations, so it should definitely help all of them and it help us in bringing the Indian economy back on track.
Economic conditions after Lockdown
The lives after lockdown is lifted will be difficult, for both business and the workers. Because of this lockdown business organisations fired their workers, so it is very difficult for them to restart their operations again. The workers are also unemployed so it will be difficult for them to earn their livelihood after the lockdown is lifted. The businesses involved in the import-export, their operations will not resume as soon as the lockdown is lifted. Pandemic will continue affecting it even after the lockdown is lifted. As there will be less foreign trade, India’s forex reserves will decrease, resulting in devaluation of Indian currency. Even the tourism industry will face problem in returning to their normal state, because people will not plan any vacation for a year and unnecessary travel will be avoided. The automobile sector will also be affected in a long run, as people do not have money to spend money on their luxury. In short, all the business organisations will take few months to return to their normal state even after the pandemic is over.
Along with all this disadvantages the outbreak of this pandemic has brought us the golden opportunity to make certain changes in our economic structure and make major economic reforms. If this opportunity is rightly exploited India can become the next economic super power in the world. The whole world is facing economic crisis; hence this can be used as opportunity to procure latest machinery and technology at a lesser cost. And as many of the worker are sitting idle at home unemployed, the cost of labour has come down, the labour is available to cheaper rates. The capital is also available at less interest rates as government is providing various loan facilities through economic reform policy. Hence this is the best time to start any industry. But this a very tricky task which should be executed with a lot of precautions.
So, to conclude we can say that we have an economic war waiting ahead of this pandemic outbreak, if we win this war, we can become the economic super power in the whole world. And if no proper measures are taken, we will go decades back in the matter of economic development. So, the government should make and implement proper plans and laws in order to win this war and emerge as economic superpower.
Author: Mr. Nimit Jain