CORONA Impact ! How bad this can affect Indian economy ?

Even before the pandemic,  Indian economy was facing a tough time. Now that the Corona virus has emerged, it has forced the Modi government to shutdown world's biggest democracy for a long 21 days . This can cause a major blow . Although with debates going on if 21 days lockdown is enough to fight this novel virus , we tried to find out how hard it can cost the Indian economy.

• What's the story ?

Indian economy was witnessing a demand downfall from the Q4 of 2018 slowing growth rate from 8.1% to 5.6% in Q3 2019.Now the answer of what could be the impact of this social and economic lockdown is very hard to estimate but it is going to be far more severe than the 2016 demonetization and 2017 GST rollout from which the economy is yet to recover properly.

As the manufacturing sectors (except essential goods) will get the major blow , rest of the industries will also feel the pain.Small and medium businesses will  suffer the biggest blow as the MSME sectors are one of the biggest job creators in India. The overall Indian economy will also get an immediate setback. Recently online players like 1MG,Bigbasket,Grofers, Milkbasket, Amazon had reached out to officials seeking help for continuing their operations as they were facing major challenges delivering essentials to their customers. The shutdown of planes, trains, and bus services has caused people to rush into airports, railway stations and bus stands, again making a mockery of social distancing. Inter-state migrants were seen walking hundreds of kilometers with women and kids in tow to their homes because there is no transport and no work.

There is no food or money to buy food for many daily wagers. In Delhi, for example, thousands of daily wagers have crowded at shelter homes set up by the Delhi government to provide them food, again making a mockery of social distancing. Business Today estimated that about 300 million informal workers could be vulnerable and seeking help.

Pronab Sen , one of the most eminent economist says, "At the moment, it is a supply-side problem. Both production and distribution of non-essentials have come to a halt. This affects at least 55% of the economy for three weeks or about Rs 2 lakh crore. It may even be larger due to previous partial lockdowns by various state governments.

Now, after the lockdown is lifted, there will quite possibly be an increase in sales which will be met through existing inventories. This does not, however, add to the GDP (as these goods and services had already been produced and accounted for). It may take a few more months for the final production and sales to resume.

In the interim, between now and full production resuming, a large number of people would have been unemployed and not earned any income. As a result, in the second round, demand-side will become a serious constraint.

• What's next ?

With the increasing number of infected patients,  it is going to be very challenging for the government to decide further actions.Despite the relief provided by Hon. Finance minister Nirmala Sitharaman and RBI the MSME sectors are going to bleed.

During this hard time we request all our readers to stand behind the small and medium businesses.We will try to bring out some such stories with a special Corona impact edition to let our readers understand the ground level reality of the present situation.