Sustainability of Indian economy post lockdown

CS Rashi Jain | Last updated: 13 October 2020

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The COVID-19 lockdown has severely impacted India's economy, affecting individuals, businesses, and government revenue. Experts predict a significant drop in GDP growth, with lasting effects beyond the lockdown period. The article outlines potential scenarios and suggests measures like Universal Basic Income, infrastructure spending, and support for small businesses to aid recovery.

IMPACT OF LOCKDOWN ON INDIAN ECONOMY

The Corona Virus (Covid-19) outbreak has not only impacted lives of general citizens, it has also severely impacted the trade and business community. The lockouts and curfew across various cities has resulted in massive downfall in business across the country. This all will hit the economic condition of everyone from a labor to a person working in a big corporate and from a small scale business to big business houses including a massive hit on government revenues.

The three-week nationwide lockdown will significantly affect India's GDP growth, making this an even worse year for the economy than the 2008 global financial crisis.
The coming financial year would really be a tough challenge for the industries to resume existing production/sales because of non-availability of raw material, labors who migrated to their home towns, finding skilled & trained workers back, corporates to maintain their growth in comparison to last years as this virus effect will be far longer than this Lock down period.
The period of Lock down can be ended soon, but the impact will be seen in first two quarters of Indian Economy.

This lockdown will have an impact on every Individual, Business Firms, Corporates, Government in following ways:-

Indian Economy Post Lockdown: Sustainability and Recovery

INDIVIDUALS

BUSINESS FIRMS/ CORPORATES

FACTORIES/MFGR. UNITS

GOVERNMENT

-earnings stopped,

-EMI’s

-cash trenches,

-migration to hometown

-less demand,

-liquidity crisis,

-heavy stock holding,

-payment of employees without work

-fixed expenses,

-working capital req,

-restrictions on imports/exports,

-wage payments,

-water crisis,

-loss of revenue,

-heavy health expenses

-big relief packages

Barclays said the cumulative shutdown cost will be around $120 billion, the new shutdown assumptions account for roughly $90 billion of additional impact.
This would roughly translate to around 2% points of a loss in output & as a result we are shaving down our CY2020 GDP forecast from 4.5% to 2.5% and FY20-21 forecast to 3.5% from 5.2%.
Data showed the worst virus-hit states account for Rs 130 lakh crore in terms of nominal GDP, or nearly 64% of national GDP.

Here is how the situation might evolve from here on for the domestic economy & markets in different scenarios:-

SENARIOS	PARTICULARS	RESULT
1.	In case the situations worsen in India and globally	-GDP may drop to 3.5%, -economy slips into recession.
2.	In a rosy situation	-march qtr impact would be severe
3.	Virus will be contained but crisis worsened	-Indian equities will outperform, global recession
4.	If situation is contained in India and Globally	-manageable economic impact on India

SUGGESTIONS:

UNIVERSAL BASIC INCOME: stipend to daily wage worker.
Increase the expenditure in Infrastructure projects.
Interest free Grants & Loans to small Businesses.
Waive off electricity bill for Commercial Busi.
Turn Govt. buildings into shelters eg. Schools
Multiply the involvement of pvt. sector for speed & scale.
Massive roll out of Covid-19 Test.

FAQ :

The lockdown has led to a massive downfall in business across the country, impacting earnings for individuals, causing liquidity crises for firms, and reducing government revenues.

The nationwide lockdown is expected to significantly affect India's GDP growth, with forecasts being revised downwards, potentially making it a tougher year than the 2008 financial crisis.

Industries will face challenges such as the non-availability of raw materials, the migration of labourers, and difficulties in finding skilled workers, alongside maintaining previous growth levels.

Suggested measures include implementing Universal Basic Income for daily wage workers, increasing expenditure on infrastructure projects, providing interest-free grants and loans to small businesses, and waiving electricity bills for commercial businesses.

Barclays estimated the cumulative shutdown cost to be around $120 billion, with new assumptions accounting for roughly $90 billion of additional impact, translating to a 2% point loss in output.