The immediate impact has been cataclysmic, but there are also concerns growing over the future of the Indian economy, the core area where Prime Minister Narendra Modi’s made the biggest promises.
Tipplers thronged liquor shops on Tuesday even as state governments levied 70 percent extra tax on booze as the nation witnesses the third phase of lockdown. Thousands of people came up and stood in serpentine queues outside the liquor shops and without following social distancing guidelines hours after the liquor store opened.
The state government’s step aims to generate more revenue from liquor sales as the lockdown has affected businesses and subsequently tax collection. Certain shops will remain open with half staff strength. Those stepping out during the relaxation period are to wear masks and adhere to social distancing norms to restrict the spread of coronavirus. The blanket lockdown, imposed as a preventive measure by PM Narendra Modi after infection cases skyrocketed in March, has brought the Indian economy down on its knees. The damage, however, has been severe and the hangover is likely to stay. With relaxation in lockdown norms, the Indian economy tries to fight back with the near future doomed by an impending recession.
Cataclysmic long drawn battle ahead
While various experts were coming out with different opinions, there seemed to be an indication that the coronavirus crisis could be a long-drawn battle. The sudden appearance of Coronavirus and its indiscriminate onslaught across countries have been giving similar nightmares to the developed as well as developing countries. Developed countries including the US, on one hand, are striving hard to maintain their respective positions in the global market while the developing ones are busy trying to make ends meet.
Lockdown has hit the service sector hard. Industries involving physical interactions such as retail trade, leisure, hospitality, recreation, and transportation services in developing as well as developed are amongst the worst hit. India is no exception! ModiNomics relied on a fully functioning India ready for liberalization. But now, the game has changed.
The first step is to gauge how the industry will look when it emerges from this crisis. The immediate impact has been cataclysmic, but the concern is also growing over the future of the Indian economy. The nationwide lockdown has gripped the industries. Even as some manufacturing units are allowed to function, mustering resources for kickstart production will not be a cakewalk for the factory-owners.
World at a Standstill
In light of the ensuing pandemic, most of the countries of the world including India were bound to observe complete lockdown with life coming to a grinding halt. Furthermore, a nationwide lockdown for 21 days that got an extension to May 3 caused a significant rise in inflation due to squeezed supply chains and got many businesses dissolved with huge receivables stuck hampering production.
The nationwide lockdown is bound to spūr inflation due to squeezed supply chains and businesses dissolved with huge receivables stuck by hampered production.
Businesses including those working on batteries & inverters that witness huge demand in the summer season are doomed in 2020. Even for those eyeing the wedding season for peak sales, the situation is no different.
Loss of revenue
As businesses tend to lose revenue, unemployment is an increasing menace. This is transforming a comparatively lean supply-side shock to a wider demand-side shock for the economy. The severity of the impact will largely depend on the duration of restrictions on the movement of people and economic activities and on the scale and efficacy of responses by national treasuries. India and the developed countries are going to take the brunt of the economic slowdown triggered by Coronavirus in the days to come.
In the wake of the Covid-19 pandemic, over 3,500 cinema theatres closed, release dates postponed, film festivals canceled and production has come to a grinding halt. With cinema theatres, thrives a bunch of local outlets including small-time eateries that have been left ignored amidst this crisis.
Interests of the small undermined
This might seem to appease the average bank credit user through rescheduled repayment of term loans and working capital facilities. But the entities and individuals engaged in MSMEs were, to an extent, ignored. Interestingly, it happens to be the same sector that governments all across the world are looking toward for providing masks, personal protection equipment, and other essentials required for restricting the spread of Coronavirus.
Perils of Indian MSMEs earning bread for 120 Million
In the absence of an advisory or a binding guideline from Reserve Bank of India, banks and financiers are not ready to approve extension on crucial payables. This makes the situation more gloomy for the MSMEs. They have still not come to terms with the challenge thrown by Corona. The hurdles span from a blockage in supply, absence of markets, the limited purchasing capacity of the target audience, and sketchy picture on availability of workforce once the pandemic recedes.
The MSMEs, as per Confederation of the Indian Industry, provide jobs to not less than 120 million people contributing close to 45 percent of the overall exports from India. 20 percent of this workforce operates in rural areas. The MSMEs have consistently proven their worth in sustainable and inclusive development besides generating large-scale employment in rural areas.
Inadequate healthcare infra and limited testing
Coronavirus has spread most in countries that are among the best equipped to handle it. There’s no reason to expect that to remain the case. The US, for example, is facing a similar scarcity of ICU beds as does India. While India has come up with the idea of launching trains modified as hospitals, the US has brought in its naval hospital ship.
The Modi-led government in India reimposing Lockdown 2.0 notwithstanding, the cases of COVID19 are still on an uphill trend. The inability of the authorities in performing contact tracing due to the limited number of testing kits overstretched healthcare systems. That has left the Indian government with no option but to stick to lockdown.
Mustering resources easier for developed countries
For those who live pay-cheque to pay-cheque, the government is the only breadwinner. This is true in India as well as in the developed countries. The developed countries have fiscal muscles strong enough to feed their respective populations that are also smaller than that of India. On the contrary, India seethes to feed its colossal population. Experts see crashed stock markets as the last straw on the camel’s back with a bleak future ahead for the Indian economy.
No option other than effective containment of the pandemic can help. Anything less than a vaccine or an approved method for treatment will not work. Saving lives should be the priority as of now. For we can always regain wealth if lost. However, nothing similar can be said with regard to life!