There was nobody who was not affected by the sudden onset of COVID-19. The impact of the virus was felt all over the globe, leaving hundreds of thousands of dead bodies in its wake. However, the complete impact of COVID-19 can not be measured with the number of corpses it sent to the morgue. The biggest gash left by the virus was on the global economy. Countries crumbled, forced to incur massive debts in order to survive, and many industries had to halt their progress completely. India’s economy was no exception to this phenomenon.
On 24 March, Prime Minister Narendra Modi announced that the country would undergo a complete lockdown putting a complete halt to civilian movement across the nation. While this extremely necessary and wise step, it would go on concur monumental loss to the Indian economy. The strain of the lockdown was felt across each and every sector of the Indian economy, making COVID-19 one of the most financially devastating things to happen to post-independence India.
Overall Impact across the nation
The economic depression felt across the country affected billions of lives. The market suddenly dropped dead, putting a complete halt to almost all economic sectors in the country. The country saw the lowest growth rates seen in the past 30 years since the economic liberalisation of India. CRISIL indicated that this might just be the worst recession to hit India since independence. SBI estimated a 40% depression in the GDP in the first quarter of the '21 fiscal year.
A majority of Indian industries were suspended, and a lot of startups had their wings cut off as they could not secure funding during the pandemic. Studies indicate that up to 53% of all businesses in the country were significantly affected, leaving the Indian businesses struggling to survive. A lot of these small companies had to lay off a portion of their workforce in order to survive. This led to an even deeper issue for the Indian populace.
During the lockdown, around 14 crore people lost their livelihoods, while others had to work with a reduced salary. Unemployment rose from 6.7% on 15 March to 26% in April. A survey conducted by economictimes.com showed that 39% of the country had to take salary cuts while 15% faced unemployment. A vast majority of employees were forced to incur salary cuts, and more than 45% of households reported a drop in income.
- Small scale businesses: Small scale vendors and service providers were almost pushed to extinction during the lockdown. Having lost their market due to the state of lockdown in the country, these businesses were forced to evolve to avoid bankruptcy. Some started their own door to door delivery services, opting to face the risk of catching COVID-19 while others were forced to partner up with a middle agent in order to survive. Amazon Business noticed a 50-60% increase in registrations by small businesses after the lockdown was imposed. Small scale service providers such as barbers, cooks, drivers, etc., arguably suffered the most during the lockdown. The ones who could avail it relied on government-provided aid to survive while the others were forced to look into other avenues to secure their daily bread.
- Food and Agriculture: Given its position as the most significant contributor to the national GDP at 16.5%, the government tried its best to minimise this sector’s damage. Prime Minister Narendra Modi announced the world’s largest food security scheme on the 25th of march while also promising several provisions to the farmers. Despite all of this effort, the food and agriculture sector took a massive hit due to the disruption of the supply chain. The ban on interstate travel also caused major issues for farmers who import their supplies from other states. There were several reports of farmers committing suicide between March and April, as they could not cope with the financial distress caused by the pandemic.
- Restaurants and Hotels: Restaurants across the country were forced to shut down dining services, putting a lot of small-scale restaurants out of work. Restaurants were forced to either provide delivery services to survive or partner up with food delivery platforms.
Hotels suffered massive losses during the pandemic, losing out on occupants due to the fear of contracting the virus before eventually being asked to shut down shop by the government’s orders. The hotel industry suffered a 30-35% in sales in March while their occupancy rate was down by 65%.
- Large companies: Many large companies were either suspended temporarily or had to work with reduced operations. These companies incurred a major hit, having to rely on government-provided tax exemptions and aid to survive. Many of these companies also had to lay off a large portion of their workforce while subjecting the rest to major salary cuts. Roughly 2 out of 5 employees in India had to work with a reduced salary during the lockdown. These companies also had to shift all operations online as the government banned all travel for anyone not working in an essential service sector.
- Marketing Sector: It was a survival strategy employed by various startups and companies during COVID-19 to reduce marketing funds and instead focus on their already existing customers. This was done to reduce expenses, but it took a heavy toll from the marketing sector. A survey conducted by influencermarketinghub.com showed that 69% of brands expect to reduce ad spending in 2020.
- Pharmaceutical Companies: The pharmaceutical industry was among the only ones that reaped overall benefits out of the pandemic and the lockdown. The stock prices for many pharmaceuticals went up by 20-30% in April 2020. While the smaller pharmaceutical companies find themselves under stress, the larger ones enjoy the financial benefits of high market demand.
- Tourism Sector: Tourism which contributes 5.06 % in India's GDP, has been brought to a complete standstill during the lockdown. The loss of foreign exchange earnings from foreign tourists’ inflow was estimated to be close to Rs 2,10,981 crore. The Indian tourism sector employs 8.75 crore people who were all suddenly forced to face significant losses due to the shutting down of the tourism sector. States that rely heavily on tourism such as Goa, Sikkim, Uttarakhand, Himachal Pradesh, Kerala, Rajasthan, etc., also incurred financial damage due to the shutting down of the tourism sector.
- Educational Institutions: Educational Institutions were all forced to temporarily suspend the academic term due to the lockdown. A lot of them had to later reopen classes online on virtual platforms in order to conclude the academic year, and a majority of them even canceled final exams. This resulted in substantial losses for many educational institutions. Fees had to be reduced, and a lot of non-teaching staff members were laid off. Students who could not afford to avail of virtual education had no option but to look for solutions elsewhere.
- Entertainment Industry: As cinemas shut down, film producers had to rely on digital media platforms to resume work. The number of films and shows produced in India was reduced massively. The entertainment industry had to evolve entirely in order to survive after suffering one of the worst financial hits since its independence.
How different sectors are coping up?
Even amidst this chaos, there appears to be a silver lining as people adapt in order to survive. Technological aid has been of paramount importance to survive during this lockdown. Small scale vendors and large corporations alike have been forced to shift to digital payment platforms in order to overcome the exponential reduction of cash transactions. The volume of online transactions in India had boosted up by around 42% to pre-COVID levels, in June, despite the lockdown as more and more merchants shift to digital payment platforms. Digital payment platforms such as OkCredit have been frontrunners in aiding Indian merchants during the lockdown.
Most of the companies have also had to shift operations online through virtual face to face media streaming platforms. This has enabled our industries to keep operating despite the imposition of nationwide lockdown in the country which in turn cushioned the overall blow on our economy.
The Indian government has been quick to its feet in responding to the threat of the fall of a major recession. If it were not for an array of government-provided financial aids and funding, the Indian economy would have collapsed by now. The COVID-19 economic response task force was quick in analysing the damage to various fields and sectors and then the government tried its best to allocate funds to try and preserve the Indian economy. The Indian government reached out to over 39.2 crore people all across the nation through financial aids and relief funds as of May 6, in an effort to combat the effects of COVID-19. The country might have fared even worse if the government had not allocated $2.8 billion as part of fiscal measures and other benefits. This amount also included a cash payout to the farmers and an increase in ration allowance for all cardholders. While the economy is on the verge of collapse, only a combination of good politics and policies can save the country from an imminent recession.