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What’s the Impact of Coronavirus On India’s Economy?

Written by Rehmat Kaur, a grade 9 student.

With over 7,500 deaths and a steady rise in cases, India is still struggling to overcome the Covid-19 pandemic…

By I Kid You Not , in Ages 12 - 18 News Opinion , at June 12, 2020 Tags: , , , , ,

Written by Rehmat Kaur, a grade 9 student.

With over 7,500 deaths and a steady rise in cases, India is still struggling to overcome the Covid-19 pandemic. This struggle is reflected in the current state of the country’s economy. The World Bank (which is an international financial institution that gives money to poorer countries when needed) has predicted that the Indian economy will go down by 3.2% in the current economic year. In May 2020, the unemployment rate was over 25%, and close to 50% of households in India reported a drop in income. There have been predictions that this will be the worst economic recession (decline in economic growth) since the time India achieved independence in 1947. 

Every single citizen, including you and me, has a significant impact on our country’s economy. But the strict lockdown enforced all over the country has put most of our daily activities to a stop. This affects the economy more than we can imagine. The decrease in demand for non-essential products affects every single person involved in bringing such products to us, from the manufacturer to the vendor. In 2019, when the unemployment rate in India was near 5%, more than 18 million people were unemployed. Millions of people lost their jobs in April when the nationwide lockdown was in full swing. In May, hiring for jobs dropped by around 61% and even now, only 5% of Indian companies and set-ups are looking to hire.  The lockdown has drastically affected daily wage earners and owners of small businesses. Think about the roadside vendor from whom we buy ice-creams in summer, the dry-cleaning shop where we take our clothes, the stationery shop from where we buy pens and notebooks. All these businesses and the people they employ have no other source of income but their shops. Because of the pandemic, they have had little to no business over the past few months.

The Reserve Bank of India stated that it would take years to fix the Gross Domestic Product after the major blow of the pandemic. When economic growth dropped by 3.1% in March, many predicted that the situation would only worsen. In a bid to improve the growth of the economy, Prime Minister Narendra Modi announced a package of Rs. 20 lakh crore in May. He stated that the package would play a role in spurring local businesses, which would then help to revive the economy. The Prime Minister also encouraged citizens to be ‘vocal for local’ and support neighborhood shops and Indian brands as much as possible. The World Bank has predicted that the next financial year will show the lowest growth figures in almost thirty years, and the State Bank of India has estimated a 40% drop in GDP next year. India was already facing an economic slowdown in 2019 when the estimated growth rate was 5% as compared to the 6.8% growth in 2018. The pandemic has magnified this slowdown, and Goldman Sachs predicts that the GDP growth for this year will be around 1.6%. 

After the past few months, things are finally beginning to look up for the Indian economy.  As businesses gradually began to open in June, the unemployment rates declined considerably and fell from 27% in May to around 17% in the first week of June. The World Bank predicted that the economy will recover in 2021, and recent reports state that there will be a 9.5% growth in the next financial year. Experts foresee a U-shaped recovery, which is when the GDP and employment rates drop sharply and stay that way for some time before slowly rising. The Government is facing the challenge of ensuring that economic revival does not take place at the cost of the citizens’ health. But if current reports are anything to go by, the grim economic situation in India will show some improvement next year. 

Written by Rehmat Kaur, a grade 9 student.

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