The Coronavirus Disease or popularly called the COVID19 has taken over the world for a halt. Throughout the world, there is clamor over social distancing and testing. The one problem that India is facing is the lockdown. Lockdown was the worldwide-adopted strategy. It seemed to buy time to test and quarantine as many suspects so that the infection chain can be broken.
However, it did break something if not the contagious chain. It is the economy of India. With zero economic activity in the lockdown period, India is paying a heavy economic price every day. This article talks about the economic loss India is facing each day of lockdown.
One thing that we all can see that there is no economic activity going around. A simple activity of haircut that is prevalent in humans for the past 7000 years is even disallowed. Even though buyers have money, if they do not spend the money will not circulate in the economy.
If people cannot get the haircut, it is a loss of income for the barber. If the barber does not receive enough money, he will cut down his expenses. Say he does not buy the bike he was planning to. Now the bike manufacturing plant will have less demand and there will be a loss in income. It would mean that it would cut down on raw materials. The steel company will have less order and hence it too would be on loss. The steel company will cut the pay of its employees. So ultimately, it is everybody’s loss.
This loss values as much as ₹7-8 lakh crores according to various analysts and industrial bodies only in the first 21-day lockdown period ended on April 15th. Acute Ratings & Research Limited values the GDP loss of $98 billion through this period, which is nearly $4.5 billion per day.
The agriculture sector has not seen much loss when it comes to production. The reason is that most of the crops were ready to harvest. The harvest season though became a problem. Lockdown caused a lack of laborers in the field so that the grains could be put in place. The daily wage laborers were at the biggest loss. COVID19 robbed them of the opportunity of earning their seasonal income. This caused the demand to fall in the rural areas.
The manufacturing sector was the struggler for the past 3 years. Demonetization and GST failure already killed the demand. The COVID19 lockdown ensured that demand falls further bringing several industries to the brink of closure.
The companies have stopped functioning. Migrant workers are forced to leave their hometowns since they no more have their livelihood. Maruti Suzuki, India’s biggest car producer by numbers, sold zero vehicles in the entire country in April. This was the first time it happened since its inception. The already struggling automobile manufacturers are not the only ones to fall. The crumbling structure took over service centers and small-time mechanics we have around us.
Though essential goods are allowed, their circulation is limited. With little to no income in the lower strata of the economic pyramid, the demand has fallen. The essential goods too are tough to circulate. The trucking industry has faced a loss of ₹35200 crores averaging ₹2200 loss per truck per day, as per data by All India Motor Transport Congress (AIMTC).Seasonal goods like ‘Navratana Tel’ that do most of the business in summers have already accepted their fate this year.
This is the most affected sector in volume and income. India’s major chunk of GDP comes from this sector. This employs most people in the unorganized sector.
For instance, services like barbers are at loss. People go for a haircut once a month. Even if the lockdown opens after three months, they will get a chance to earn only once.
There is no travel. Hence, there are no cabs or petrol pumps in business.
Food Delivery applications were lauded for opening employment in delivery services. The lockdown has shut the entire food delivery business.
Hotel, aviation, and tourism industry will suffer the most even after the lockdown ends. People would be wary while going out.
Air Asia has already refused to pay refunds to the customers who have already booked the flight. Instead, they may buy the ticket worth the same amount any time later.
Real Estate sector’s National Real Estate Development Council estimates a loss of ₹1 lakh crores post the first phase of lockdown.
The State Government has faced the biggest losses. After GST, they have minimal powers when it comes to levying the tax. The only three businesses that earn for them is Real Estate Buy and Sell duty, tax on petroleum products, and the tax on liquor.
The lockdown has closed all of them. Chief Minister of Punjab Mr. Amrinder Singh has advocated the home delivery of liquor owing to depleting coffers. Nagaland government has already imposed a COVID cess of ₹6 per liter of petrol and ₹5 per liter diesel. Others may soon follow the suit.
Various rating agencies have already attributed a poor growth rate of around 4.5% for FY 2021. The estimates have fallen even below 2%. The lockdown even if it opens by the end of May will take much time for the nation to recover. The GST collections have fallen to ₹23000 crores in April (from a general level of ₹95000 crores).
As former RBI Governor Raghuram Rajan said, “COVID19 is the biggest emergency India has seen since independence”. The facts are evident. The government is unable to procure more testing kits or PPE sets for doctors.
The COVID19 crisis and its subsequent lockdown have come at the most inappropriate time to India. With an already struggling economy and more people becoming poorer again, COVID19 is the last thing a country could bear. World Bank estimates that India may lose the growth it made in the golden years in 1991-2016 and line itself again as a poorer nation.
It is the moment where we could only pray for a better future and that our economy survives this crisis.