While we are staying indoors to minimize the threat, there is spiral and direct impact on economy, mental well-being of people and overall way of living
Coronavirus cases and the death tolls are increasing each day. While the lockdown has managed to keep the numbers from growing exponentially, the virus still continues to be a threat.
While many of us stay indoors to ensure that the impact of this threat on lives in minimized, there is spiral and direct impact on economy, mental wellbeing of people and overall way of living as we know it.
Some surveys and data
As per the World Bank’s latest assessment, India is expected to grow 1.5 per cent to 2.8 per cent. The International Monetary Fund projected a gross domestic product (GDP) growth of 1.9 per cent for India in 2020, as the global economy hits the worst recession since the Great Depression in 1930s.
According to a CLSA report, pharmaceuticals, chemicals and electronics businesses may face supply-chain issues and prices will go up by 10 per cent.
According to the CII, GDP could fall below 5 per cent in FY 2021 if policy action is not taken urgently.
A FICCI survey showed 53 per cent of Indian businesses have indicated a marked impact of COVID-19 on business operations. And 42 per cent of the respondents said up to three months could take for normalcy to return.
The United Nations Conference on Trade and Development (UNCTAD) has suggested that India’s trade impact due to the COVID-19 outbreak could be around $348 million.
According to KPMG, the lockdown in India will have a sizeable impact on the economy mainly on consumption which is the biggest component of GDP.
Understanding the Impact
In terms of imports, the dependence of India on China is huge. Of the top 20 products (at the two-digit of HS Code) that India imports from the world, China accounts for a significant share in most of them.
India’s total electronic imports account for 45 per cent of China. Around one-third of machinery and almost two-fifth of organic chemicals that India purchases from the world comes from China.
For automotive parts and fertilizers, China’s share in India’s import is more than 25 per cent. Around 65-70 per cent of active pharmaceutical ingredients and around 90 per cent of certain mobile phones come from China to India.
In terms of exports, China is India’s third-largest export partner and accounts for around 5 per cent share. The impact may result in the following sectors namely organic chemicals, plastics, fish products, cotton and ores, among others.
In India the three major contributors to GDP namely private consumption, investment and external trade will all get affected.
The pandemic and consequent lockdown have hit various sectors, including MSME, hospitality, civil aviation, agriculture and allied sector.
Pharmaceuticals: The toll on the pharmaceutical industry is of significant concern for India, mainly as 70 per cent of active pharmaceutical ingredients (API) are imported. These APIs are essential to a large number of pharmaceutical manufacturing companies in the country. As COVID-19 is rapidly making its way through India, medication is going to be the number one consumer demand, and because there aren’t nearly enough APIs to manufacture drugs, the subsequent traders and the market are witnessing skyrocketing prices. The prices of vitamins and penicillin alone already see a 50 per cent surge.
Tourism: COVID-19 has resulted in one of the severest downturns for the travel and tourism sector in India. Coming on back of a sluggish economy and subdued growth over the past few years, the COVID-19 blow is widely expected to push the sector to the brink. The aviation and tourism sectors are direly impacted leading to a near collapse of the sector, majorly owing to the cancellation of inbound visas and stringent restrictions on domestic or international travel. The aviation and tourism sectors are direly impacted leading to a near collapse of the sector, majorly owing to the cancellation of inbound visas and stringent restrictions on domestic or international travel.
Hotel and restaurants: There has been a massive decline in the restaurant and food service business. Business stays, leisure stays, family holidays, get-togethers, social occasions, etc., are being completely curtailed and in such a scenario the hospitality sector is taking a hard hit. Layoffs seem inevitable in the restaurant sector as cash flows have dried up almost completely. Small and mid-size restaurants would be the worst affected as they struggle to cover fixed costs.
Aviation: This outbreak has hit the aviation industry. After the government of India indefinitely suspended tourist visas, airlines are said to be working under pressure.
Private airport operators have requested the government to grant permission to impose a nominal passenger facilitation charge on airfares to cover the increased operating cost.
Auto industry: The automobile sector currently contributes about 50 per cent of the manufacturing gross domestic product (GDP) in India; hence this sector will be the most affected sector due to the global pandemic.
Uncertainty is hovering over the Indian automotive industry and the coming months are expected to unleash a host of challenges to this sector staring at shrinking sales and fast-evolving consumer preferences. Automobile and component manufacturing plants are being shuttered around the world, consumer footfalls in showrooms have fallen sharply, vehicle sales are dropping dramatically and almost every major industry event is either being cancelled or going the digital way.
Macroeconomic issues that added to this crisis include the decline in demand/consumption both from the rural and urban markets, and a liquidity crunch in the financial market.
Electronic industry: Nearly 55 per cent of electronics imported by India originate from China. These imports have already slid down to 40 per cent in light of the coronavirus outbreak and subsequent lockdown. India’s electronic industry may face supply disruptions, production, reduction impact on product prices due to heavy dependence on electronics component supply directly or indirectly and local manufacturing.
Implications on the workforce
Undoubtedly, with this crisis impacting the business around the country, it will create very challenging situations for the workforce. Companies are not meeting the revenue targets hence, forcing employers to take cost cutting decisions.
Job losses and salary cuts are likely in the high-risk services sector, including airlines, hotels, malls, multiplexes, restaurants and retailers, which have seen a sharp, fall in demand due to lockdowns across the country. Not only the employees of multinational companies, but daily wage workers have been impacted the most during this crisis.
According to a preliminary assessment report, nearly 25 million jobs could be lost worldwide due to the coronavirus pandemic, but an internationally coordinated policy response can help lower the impact on global unemployment.
Impact on employee mental wellness
This pandemic has created an environment of uncertainty among the people across the country. While we are focusing on maintain our physical health but somewhere we are ignoring the fact that this situation is affecting our mental health too.
Anxiety level is increased in employees resulting in serious health issues.
As per the recent media reports COVID-19 is having the positive impact on crime, as it is being said that the crime rate witness download trend in India but what about the non-reported crime, i.e. domestic violence. The National Commission for Women, which receives complaints of domestic violence from across the country, has recorded more than twofold rise in gender-based violence in the national coronavirus lockdown period.
Job loss, salary cuts, an uncertain future arising out of the lockdown has everyone on edge and there is an increase in violence within the boundaries of home.
Impact on lower strata
This lockdown has mainly hurt daily wage earners, contractual labor and self-employed workers, among others, in the informal economy in rural and urban areas, pushing them out of jobs amid the nation’s high unemployment rate.
As many as 92.5 per cent of labor have already lost one to three weeks of work, according to a rapid assessment survey by Jan Sahas, a civil society organization that focuses on human rights of socially excluded communities.
What we need to understand is that the effect of this virus will not be just economical but societal. The virus does not differentiate between the rich and poor, between one state or the other. This is the time for all of us to really rise as human beings, as one society, as one country and continue to battle the virus with resilience and empathy.
The government is taking all the necessary steps to help us fight this situation. We all, as individuals need to do our bit by taking care of our own wellbeing—physical, mental and emotional—and those around us, our family members, our domestic staff and our teams at work. Let’s follow the rules of the lockdown. Let’s not be in a hurry to lay off. Let’s find other ways of reducing costs. Let’s be generous and kind. It’s easy to be generous and kind when times are good. It is during these tough times that true character is revealed.