The unprecedented crisis of COVID-19 and the lockdown have shattered the economy of India in a brutal way. It resulted in a further increase in the unemployment rate in India and a fall in the Gross Domestic Product (GDP) growth rate. The International Monetary Fund (IMF) has projected that the GDP of the Indian economy would contract by 4.5 percent in the year 2020 and would be 6 percent in 2021.
To get the economy moving, the Government of India and Reserve Bank of India (RBI) announced various measures which included policy changes, reforms, relief packages, bank loans, and infrastructure building plans and so on. No doubt all of these steps were necessary and timely, but on-ground implementation and the help reaching the needy is more important in the time of such an erratic crisis. These measures are required to boost the consumption demand which has been slumped by the lockdown.
Service: The process of unlocking the economy has begun. The impact of the same across industries in the service sector has been studied by Economic Times. It suggests that industries such as Fast-moving consumer goods (FMCG) would be performing good, digital demand would be performing above average. E-commerce, retail, power, smartphones, and petroleum would be performing average compared to their last year’s performance and growth in the next year 2021. However, industries such as ride-hailing or taxi, hospitality, automobiles, aviation, real estate would find it difficult to retain their business. Moreover, it should not be forgotten that it’s still early days to start quantifying the demand growth or demand slump without waiting for one or two months to see how it goes.
In the service sector, most of the IT companies have been following work from home (WFH) during the lockdown and are likely to continue to follow it in the future as well. Many of them see this option as a vital option as it has saved major operation and maintenance cost of these companies.
Industry: There are major challenges faced by the manufacturing units of companies even after the process of unlocking has been initiated. It includes hurdles such as mounting costs and comparatively low or no revenue due to shortage of labour leading to a reduction in the level of production, markets are not fully open therefore limited sale, the employers have been advised to make arrangements for labourers or workers to stay at the premise of the factory. This is the case of an established company.
Not to be missed an integral part of the manufacturing sector, the Micro, Small, and Medium Enterprises (MSMEs) who are likely to face more challenges in operation. The loans guarantee against the Non-Performing Assets (NPAs) and investment facilities provided to MSMEs are more or less bank-centric and pay little attention to providing the money immediately to the MSMEs to re-start their business, pay salaries and also for other operating costs.
Further, these loans are not reaching the MSMEs mainly due to two reasons. Firstly, the banks were undertaking only essential services during the lockdown period as per directives. This included cash deposits, withdrawals, salary and pension payments, clearing of cheques, remittances, besides all interbank and government transactions and giving loans were not part of essential services; secondly, non-availability of stamp papers for the bank guarantees. These issues are the stumbling blocks on the suddenly over-relied manufacturing policy i.e. ‘Make in India’. Therefore, it is extremely necessary to focus on the implementation of the government policies and ensure that the aid reaches the needy so that the wheel of the economy begins to move.
Agriculture: COVID-19 has provided us to revamp the agriculture sector that has been the ailing sector over the years due to various reasons which are lack of private investment, water scarcity, inefficiency in the implementation of various policies on the ground, marketing and pricing challenges. All of these issues result in the increasing vulnerability of the poor farmers. Out of all these issues, the Government of India has addressed one during the announcement of ‘Atmanirbhar’ a series of policy reforms to tackle the economy post-COVID-19.
Now, as per the announcement, a new central law will be formulated to provide barrier-free inter-state trade of farm produce and more freedom for farmers to sell directly or even online. Through this, the restriction over the farmers to sell their product or products in nearby agricultural produce market committees (APMCs) is removed and they are allowed to sell their products any part of the country. In a way, this move will help farmers to reduce their vulnerability and increase their revenue. Nevertheless, farmers will have to incur the transportation cost which might not be possible for all the farmers especially, the small and marginal farmers. In such scenarios, they can opt for co-operative transportation or two or three or more farmers pooling the transportation facilities together as a way to reach new markets in other cities and towns to reduce the cost borne by each one of them.
Further, in order to export agricultural products, farmers will have to improve the quality of the products. As in 2014, the European Union (EU) banned the import of mangoes, eggplant, the taro plant, bitter gourd and snake gourd, citing “significant shortcomings in the phytosanitary certification system of such products exported to the EU” from India. Therefore, to leverage trading opportunities, this is the time for farmers to take into consideration and focus on organic farming to reach the quality of products as per global health standards.
Considering the heterogeneity of problem every sector or industries are facing, the Indian economy will take time to adjust to new normal. Moreover, measures taken to move the economy forward would take time to unfold fully. Their impact can be witnessed after a certain period of time when the actual implementation of measures and policy reforms has been performed. We definitely have to keep moving forward but also need to be patient as any steps taken in a haste might not give us the expected result due to uncertainty prevailing in the economy. Therefore, currently, the focus should be on sustaining through this crisis.