impact of lockdown in indian economy essay in 500 words
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Explanation:
With fresh coronavirus cases on the rise in India, the nation has started witnessing second-round effects of the virus spread: a complete halt to economic activity.
The government, analysts said, must consider more measures to tackle the situation, if third round of effects – job losses, stretched balance sheets, lower capex and weak consumer demand – are to be tamed.
The first two rounds of coronavirus outbreak have already wiped off Rs 52 lakh crore worth of equity investor wealth, with benchmarks Sensex and Nifty languishing at multi-year lows after falling 35 per cent from their January peaks.
January was the month when the virus was spreading in China at a rapid pace. It brought about the first round of impact on India, where companies saw supply-side disruptions, owning to their over-dependence on Chinese imports.
Sectors like autos and pharmaceuticals were impacted severely due to shortage of imported components.
As the virus began spreading in India, it paved way for the second-round effect, where economic activity came to a halt due to lockdowns.
A host of companies from cement (India Cements) to heavy engineering (BHEL) and from automakers (Maruti Suzuki, M&M and Hero MotoCorp) to ancillaries (Amtek Auto) Castrol India), have announced temporary shutdowns.
FMCG firms such as Hindustan Unilever, ITC and Dabur India also shut manufacturing facilities, except for plants producing essentials, after the government announced partial lockdowns in some parts of the country.
On Tuesday, the government announced a nationwide lockdown for 21 days, which is likely to bring all economic activity to a grinding halt.
“The third round effect will likely materialize, as these shocks transmit to the rest of the economy, i.e. corporates facing a hit on bottom lines. Weaker firms will face cash flow shortages and workers will face pay cuts or retrenchments. This, in turn, can create a vicious cycle of lower corporate capex and weaker consumer demand,” Nomura India warned.