Question

nationwide lockdown to flatten covid-19 gave a huge dent on economy ? EXPLAIN

Answer 1

Explanation:

Due to lockdown the demand of consumers declined and at the same time the lockdown forced manufacturing or service industry to cease their production. The demand and supply curve shifted to its left that is both decreased.

The lower demand for the goods reduced the profit margin of the companies therefore, they were forced to reduce the workforce as they were unable to pay the salary or wages due to low demand. This gave rise to unemployment.

In addition to above explanation we can think of Indian economy as such economy which has became a Gig Economy. In our country a majority of population works in informal sector and their earning is on daily basis. They are dependent on the working population as the working population is not getting their salary they won't make purchase from these people. Hence, a large population became unemployed.

Unemployment created doubts in the mind of buyers thus, they started postponing their buying decisions for future that is to that time when they will be confident for a finite source of income. Right now everyone is in ambiguity that whether they will be getting their next month's salary of not. The consumer confidence is at the lowest level.

As a resultant the aggregate demand and supply curve had shifted to its left. Hence, a lower GDP.

note. All this is due to Gig Economy. Government has failed in creating jobs and a number of people lost their jobs in past due to Demonitization, and GST implementation. GST wad a good thing but a number of small firms were forced to shut down as large firms were not ready to trade with them due to one of the glitch in the GST. There is a clause which differentiates Small firm and large firm and on that basis it is decided when and how many number of times firms will be required to file taxes. Large firms will file tax every month while.small firm are required to file every quarter. This created a huge problem. You can google more on it for further clarification. thank you.