project on impact of COVID-19 on Indian economy
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Answer:
The economic impact of the 2020 coronavirus pandemic in India has been largely disruptive. India's growth in the fourth quarter of the fiscal year 2020 went down to 3.1% according to the Ministry of Statistics. The Chief Economic Adviser to the Government of India said that this drop is mainly due to the coronavirus pandemic effect on the Indian economy. Notably India had also been witnessing a pre-pandemic slowdown, and according to the World Bank, the current pandemic has "magnified pre-existing risks to India's economic outlook".
Economic impact of the COVID-19 pandemic in India
IMF World Economic Outlook April 2020 Real GDP growth rate (map).svg
Map showing real GDP growth rates in 2020, as projected by the IMF.
Date
March 2020 – present
Type
Global recession
Cause
COVID-19 pandemic-induced market instability and lockdown
Outcome
Sharp rise in unemployment
Stress on supply chains
Decrease in government income
Collapse of the tourism industry
Collapse of the hospitality industry
Reduced consumer activity
Plunge in fuel consumption. Rise in LPG sales.
The World Bank and rating agencies had initially revised India's growth for FY2021 with the lowest figures India has seen in three decades since India's economic liberalization in the 1990s. However after the announcement of the economic package in mid-May, India's GDP estimates were downgraded even more to negative figures, signalling a deep recession. (The ratings of over 30 countries have been downgraded during this period.) On 26 May, CRISIL announced that this will perhaps be India's worst recession since independence. State Bank of India research estimates a contraction of over 40% in the GDP in Q1 FY21. The contraction will not be uniform, rather it will differ according to various parameters such as state and sector.
Within a month, unemployment rose from 6.7% on 15 March to 26% on 19 April.[1] During the lockdown, an estimated 14 crore (140 million) people lost employment while salaries were cut for many others.[1][2] More than 45% of households across the nation have reported an income drop as compared to the previous year.[3] The Indian economy was expected to lose over ₹32,000 crore (US$4.5 billion) every day during the first 21-days of complete lockdown, which was declared following the coronavirus outbreak.[4][5] Under complete lockdown, less than a quarter of India's $2.8 trillion economic movement was functional.[6] Up to 53% of businesses in the country were projected to be significantly affected.[7] Supply chains have been put under stress with the lockdown restrictions in place; initially, there was a lack of clarity in streamlining what an "essential" is and what is not.[8] Those in the informal sectors and daily wage groups have been at the most risk.[9] A large number of farmers around the country who grow perishables also faced uncertainty.[8]
Vendor of greens, essential supply chains and logistics. Life under lockdown. Bangalore spring 2020.
Major companies in India such as Larsen & Toubro, Bharat Forge, UltraTech Cement, Grasim Industries, Aditya Birla Group,BHEL and Tata Motors have temporarily suspended or significantly reduced operations. Young startups have been impacted as funding has fallen.[10][11] Fast-moving consumer goods companies in the country have significantly reduced operations and are focusing on essentials. Stock markets in India posted their worst loses in history on 23 March 2020.[12] However, on 25 March, one day after a complete 21-day lockdown was announced by the Prime Minister, SENSEX and NIFTY posted their biggest gains in 11 years.[13]
Indices: S&P BSE 500 (1 January 2015 to 9 May 2020)
The Government of India announced a variety of measures to tackle the situation, from food security and extra funds for healthcare and for the states, to sector related incentives and tax deadline extensions. On 26 March a number of economic relief measures for the poor were announced totaling over ₹170,000 crore (US$24 billion). The next day the Reserve Bank of India also announced a number of measures which would make available ₹374,000 crore (US$52 billion) to the country's financial system. The World Bank and Asian Development Bank approved support to India to tackle the coronavirus pandemic.[14]
The different phases of India's lockdown upto the "first unlock" on 1 June had varying degrees of the opening of the economy. On 17 April, the RBI Governor announced more measures to counter the economic impact of the pandemic including ₹50,000 crore (US$7.0 billion) special finance to NABARD, SIDBI, and NHB.[15] On 18 April, to protect Indian companies during the pandemic, the government changed India's foreign direct investment policy. The Department of Military Affairs put on hold all capital acquisitions for the beginning of the financial year.
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In response to the biggest economic crisis since 1979 triggered by the Covid-19 pandemic and the subsequent 54-day lockdown – one of the harshest in the world, the Central government’s fiscal relief so far is limited to just about 1.1% of GDP. It has, however, allowed states to increase their borrowing limit unconditionally by 0.5% of their Gross State Domestic Product (GSDP) or Rs 1.07 lakh crore.
A chunk of the Centre’s fiscal relief – Rs 40,000 crore or 0.2 per cent of GDP – has come as additional allocation to MGNREGA over and above the Budget Estimate of Rs 61,500 crore in the fifth and final tranche of the Atmanirbhar package announced by Finance Minister Nirmala Sitharaman on Sunday.
Much of the May 12 Atmanirbhar package of Prime Minister Narendra Modi totaling Rs 20 lakh crore and elaborated over the last five days by Sitharaman has been liquidity driven, with little burden on the exchequer. The government also took this opportunity to re-package some of the old measures, and push some new reforms such as in agriculture, public sector enterprises, which has been pending for long.
The money that the poor got in their hands over the last two months following the Central government announcements has been just Rs 33,176 crore so far, Finance Minister Sitharaman said. This includes Rs 10,025 crore to women Jan Dhan account holders, Rs 16,394 crore to
The farmers under PM Kisan Yojana (frontloading of payment without additional fiscal cost), Rs 2,807 crore to old persons, widows and the disabled, and Rs 3,950 crore to construction workers (also without any fiscal outgo since it is paid from the Building and Construction Workers’ Cess Welfare Fund).