This article has been written by Utkarsh Dubey and Drishti Gupta, students of Hidayatullah National Law University, Raipur.

Introduction

Coronavirus or COVID-19 as it is officially known, has brought everyday life of human beings to a standstill. Ever since the first case of COVID-19 was reported to today when almost every country in the world is affected, it is just almost 6 months from the 1st case officially reported. Originally reported first in Wuhan, China, the COVID-19 virus traveled throughout the world and infected millions. COVID-19 is unstoppable unless a vaccine is developed. 

Although people have recovered from COVID-19 without a vaccine, that process is turning a nightmare since out of those who were recovered, people in many countries including South Korea have shown the symptoms of COVID-19 again as if the virus has reverted. This new scenario of COVID-19 has further left people vulnerable to the infection as they are not secure even after being recovered from COVID-19. 

As many as 162 countries are going into lockdown, and businesses across the globe are either closed or operating in fear. The situation has further worsened ever since the WHO coronavirus expert has said that “There may never be a COVID-19 vaccine”. (1) The current situation along with slow economic growth in the previous year in India is leading to extreme tensed market conditions. There were rising fiscal deficits, unemployment, and interest rates. Along with this, the Novel Coronavirus has sent tremors down Indian trade markets.

Effects on Different Sectors of Indian Economy

The Indian economy, one of the developing economies is facing huge trouble from market shutdown as the downfall of the economy would lead to a market recession without proper flow of funds. All the sectors are getting adversely affected. 

Agriculture and Food Processing

It was expected that all the major sectors of the economy will take a hit due to the pandemic. But the agriculture and allied activities sector is likely to be adversely hit by the pandemic. The poultry sector which is the fastest growing sub-sector of the Indian agriculture eco-system and where India has created a foothold at the global level (India is the third-largest producer of eggs and fifth largest producer of broilers) is already facing losses to the tune of 150-200 crore each day. Social media has been spreading rumors by correlating COVID-19 infection to the consumption of meat and poultry products. This has caused enormous destruction in demand for poultry products and the prices realized by farmers have crashed to Rs 10-15 per kg – whilst the production cost of about Rs 70 – 80 per kg (2).

Capital Markets

In the present scenario, there is a need to ensure a steady flow of funds to the industry through the primary markets and therefore certain rules are needed to be changed to make this easier. Some additional measures are also required to decrease instability in the market.

Pharmaceuticals

China accounts for 70% of India’s active pharmaceutical ingredients (APIs) (3). The active pharmaceutical ingredients (APIs) are essential for any country for pharmaceutical manufacturing countries. As COVID-19 cases in India increased to 101K, medicines are going to be increasing in demand since there are not enough APIs to manufacture and therefore the market will witness all-time high prices. (4)

Tourism

There is a great scope for India on cultural and historical tourism which attracts domestic and foreign nationals throughout the year. As a result, a large number of COVID-19 cases are foreign tourists. The matter of concern here is that since visas are being suspended and tourist attractions are shut down for an indefinite period, the whole tourism industry took a great hit. There is a great loss on the part of attractions, restaurants, agents and operators, and hotels. It is expected that the pandemic could end up crippling the tourism industry for the near foreseeable future.

Aviation

Ever since the Indian government suspended the domestic and international flights, the Aviation Industry is suffering a daily loss of Rs. 75-90 crore and the Indian aviation industry will require additional funding of Rs 325-Rs350 billion over FY 2021-2013 according to rating agency ICRA limited. (5) In short, the aviation industry is undergoing severe losses since the flight operations were canceled. The pandemic has affected the industry that it will need either a government package or has to levy additional charges on the passengers to be back on the track.

E-commerce

Ever since the pandemic struck our country, the government has issued several advisories related to social distancing and to avoid leaving home for unnecessary purposes. It led to organizations asking their employees to work from home. Moreover, the lockdown has made things worse because it led to an increase in demand as people were asked to refrain from leaving homes, especially in red and orange zones. But since there was a complete lockdown, the E-commerce websites were not able to deliver the goods. This resulted in a loss to both consumers and corporations. 

Education

With the announcement of a nationwide lockdown, schools and colleges were also closed in March. March is crucial as many of the board exams and college exams were scheduled in March and April. Moreover, in many institutions, the syllabus is also not complete. Although online remedial classes are being provided in the majority of the institutions, students are worried about the exams.

Real Estate and Construction

The year 2019 was difficult for the real estate sector as it suffers to struggle with funding crises amid NBFC and banking sectors. Moreover, the economic slowdown has further exacerbated the sufferings resulting in poor housing demand.

On the other hand, there has been a mass exodus of migrant workers ever since the government has announced lockdown. Since there was no source of income left for the workers to sustain their daily needs, they were left to be dependent on the government for food and other necessities. But the fear of pandemic has forced them to go back to their homes from large cities like Delhi and Mumbai. With railways, roadways and airways came to a standstill, they were forced to walk down to their homes with some of them living as far as 1000 kilometers. This led to a huge crisis and also the uncertainty of their return.

Hence, the pandemic has hit almost every sector of the economy in India and the recovering process is difficult at such times. Not only India but the whole world is facing such an economic crisis and for coping up with the pandemic loss the organizations which have the responsibility to balance the economy in such adverse conditions are taking steps to give a helping hand to the countries falling apart economically at the global or international level. 

Global Economy Effects

The threat hovering the world currently is now not only taking down the life of people but also the economies of the countries affected by this COVID-19. The pandemic is hazardous to the economic structures around the world and making them falling off the cliff as the citizens around the world are under lockdown and for there safety people are forced to keep their business closed, which leads to shut of economic activities and the liquidity is seizing in the market, which makes it difficult to even handle and normalize the effects around as the outbreak has disturbed the whole of each part affected.

The topmost economies are being dragged to slump such as America, China, Japan, UK, France, Italy, etc. Even declarations from the IMF (International Monetary Fund) show that as earlier before COVID-19 IMF expected this year the economy globally would grow 3.3% at a slow pace but now the global economy is expected to fall by 3% in 2020 (6) which will be the steepest fall down of economies since the great depression of the 1930s.

The Pandemic’s Effect on the World 

The economy has been dragged to the recession and for a restart, the government is preparing to start the activities contributing to the economy again with all the precautions necessary. The rate of unemployment is hiking the highest and the suffering occurs most to the daily wage workers because of the shutdown. 

In the United States of America (USA) millions of workers have registered for unemployment benefits. Even the figures show that in march end the unemployment benefits complaints reached 36 million which is a quarter of the working population in the country. (7) 

The advanced economies are expecting a growth of -6% this year and even China, the country which the world is accusing of the pandemic start or outbreak, also has a huge financial crisis. The GDP of China fell by 6.8% in the first quarter of the year itself. (8) Even the IMF reports showed the oil pricing affected and the food and beverages section also hit hard. Due to no use of transportation, the demand for oil has been stroked down in the market which led to the imbalance in the foreign direct investments of the countries supplying oil such as Arabic countries and as the lockdown is continued in the world the lesser use of food and beverages other than homemade has decreased which led to decrease in the prices of items around 2.6% in 2020. (9)

The government of the different countries is facing the threat with the help of the world economic forum (WEF) which is supporting the small enterprises and businesses for stabilizing the employment and the financial status.

Actions in response globally

For defeating the deadly virus the response must be quick and effective as possible.the two most important committees focused on bringing the stranded economy together under the crisis are International Monetary Fund and World Economic Forum. 

International Monetary Funds (IMF) Actions 

Kristalina Georgieva, Chairwoman and Managing Director of the International Monetary Fund mentions coronavirus pandemic and measures the global crisis like no other needs a global response like no other. Before the pandemic converts into a great depression and disintegrates the whole economies of affected countries into shredded pieces, it needs to be acted upon. 

The central banks all over the world are undergoing liquidity injection and an enormous amount of $8 trillion have been spent for fiscal measures (10) by different countries which are for lessening the economy’s pain in the current situation. Under the actions taken by the IMF, it is considering emergency funding requests by several countries around the world who are the member countries, and about $100 billion demands are expected to be met by the organization. (11)

The recent sudden fiscal actions also include the authorities spending 2% of the GDP for the crisis occurring due to pandemic and under the allotted funds one third will directly go to the health sector. (12) IMF is focusing on eliminating the non-essential spending so the essential spending for the social relief package and liquidity injections in the economy. The authorities also increased the tax payment dates and IMF collaborated with the World bank for better facilities through financial assistance to the needy. 

World Economic Forum (WEF) 

In partnership with the world health organization (WHO), the world economic forum has launched the COVID action platform for dealing with the global emergency and crisis affecting people. For better facilities to be provided to people for health response. 

The organizations’ collaboration persuades corporate leaders for doing business of the essential commodities. Klaus Schwab, founder and managing director of the World Economic Forum warns that COVID-19 causes health emergencies and economic disbalances/disruptions which no single stakeholder can even address. (13)

The COVID-19 action platform was performing on three basic regulations to be established- 

• Business support and cooperation for COVID-19 responses. 
• Promoting business continuity and helping in protecting the livelihoods of the people suffering. 
• Bring the corporate business community together for improved life and opportunities. 

The actions by the IMF and WEF might prove beneficial for the world and even the countries could use the help for regaining the losses of the economic strains due to the pandemic. Even India is also availing the opportunities of the hour and in whatever way possible to come back in line being the 6th largest economy of the world and maintaining its position. 

Opportunity for India is in the crisis

With the trade war between the US and China at its peak, the pandemic has further exacerbated the situation leading to many companies wanting to leave China. Ever since the various Nations are holding China responsible for the outbreak of the pandemic, many countries are paying their companies to move out of China. The native companies of Japan which are working in China are being ordered by the Japanese government to stop functioning in China. Many other companies such as Apple are also planning on shutdown as a protest against the nation. (14)

Therefore, it is a great opportunity for India and they should seize it. India can attract those companies to come here and set up their plants here which will be beneficial for India as the companies will bring investments, jobs as well as the transfer of technologies. There was an economic slowdown in the country, the pandemic will further worsen it. If India seizes this opportunity, it will help to overcome the economic slowdown.

Suggestions and Conclusion

There are multiple measures that the government can do for the people and the country with the economic and health crisis. When focusing on liquidity the government should keep on a priority basis the due payments to farmers which will help in the trading system in rural areas and e-commerce must be allowed to work with high precautions. The government could also fix alternate days for trading and could even use the debt restructuring scheme which should be introduced by the government to allow debt extension in this deadly period. The financing structures of 750 billion for the Micro, small, and medium enterprises (MSME) would also boost the economic balancing schemes. (15)

Even the support could be drawn if the authorities would take control of the essential products and stop them from being hoarded by the black marketers and the aviation sector serving best for transportation should also prevent levying heavy taxes on the passengers which would travel when facilities would be started. The injections by the world bank with the IMF and WEF should also be used and the liquidity injections must be made by the government for balancing the deficits. 

The capital base of companies should become strong again with the investments and Atma Nirbhar scheme started by the government which will promote products made in India itself and the circulation of money would become helpful to our country. The thought of sustainable development can also be considered for getting benefits in the long run and even the durability for the most vulnerable section of society, the daily wage workers who have lost their employment. Better facilities to them will provide better life expectancy and a resilient economy in crisis. 

Hence, the long-run decisions must be taken by the government as enough loss and damage have been caused to the economy due to all the funding being directed towards health emergencies in the pandemic. The resilient community must be built for the strengthful economy to come in the future. 

References

1. World News & Europe News, Coronavirus Vaccine Update: There are chances no COVID-19 vaccine could be around, ever | World News – Times of India The Times of India (2020), https://timesofindia.indiatimes.com/world/europe/there-may-never-be-a-covid-19-vaccine-who-coronavirus-expert/articleshow/75526635.cms (last visited May 19, 2020).
2. Ficci.in (2020), http://ficci.in/spdocument/23195/Impact-of-COVID-19-on-Indian-Economy-FICCI-2003.pdf (last visited May 19, 2020). 
3. India looks to cut reliance on China for APIs, Bioworld.com (2020), https://www.bioworld.com/articles/434213-india-looks-to-cut-reliance-on-china-for-apis (last visited May 19, 2020).
4. (2020), https://www.accuweather.com/en/in/national/covid-19 (last visited May 19, 2020).
5. Rhik Kundu, All flights will remain suspended at least till the end of this month (2020), https://www.livemint.com/companies/news/covid19-flight-services-to-remain-grounded-at-least-till-31-may-11589725112803.html (last visited May 20, 2020).
6. The global economy is expected to shrink by 3% this year, The Economist (2020), https://www.economist.com/graphic-detail/2020/04/14/the-global-economy-is-expected-to-shrink-by-3-this-year (last visited May 19, 2020).
7. Explained: How Covid-19 has affected the global economy, The Indian Express (2020), https://indianexpress.com/article/explained/explained-how-has-covid-19-affected-the-global-economy-6410494/ (last visited May 19, 2020).
8. ohn Detrixhe Jane Li, The coronavirus outbreak might be nearly over in China, but economic hardship is not Quartz (2020), https://qz.com/1839062/china-gdp-contracts-6-8-percent-in-first-quarter-due-to-coronavirus/ (last visited May 19, 2020).
9. Supra note 5, at food and beverages.
10. When $8 Trillion in Global Fiscal Stimulus Still Isn’t Enough, BloombergQuint (2020), https://www.bloombergquint.com/china/when-8-trillion-in-global-fiscal-stimulus-still-isn-t-enough (last visited May 19, 2020).
11. A Global Crisis Like No Other Needs a Global Response Like No Other, IMF Blog (2020), https://blogs.imf.org/2020/04/20/a-global-crisis-like-no-other-needs-a-global-response-like-no-other/ (last visited May 19, 2020).
12. Policy Responses to COVID19, IMF (2020), https://www.imf.org/en/Topics/imf-and-covid19/Policy-Responses-to-COVID-19 (last visited May 19, 2020).
13. World Economic Forum launches COVID-19 Action Platform to fight coronavirus, World Economic Forum (2020), https://www.weforum.org/agenda/2020/03/world-economic-forum-launches-covid-action-platform/ (last visited May 19, 2020).
14. Companies moving out of China; will India seize the, https://www.thehindubusinessline.com/markets/stock-markets/companies-moving-out-of-china-will-india-seize-the-opportunity/article31418116.ece (last visited May 19, 2020).
15. Aman Srivastava, After COVID-19, 5 Ways India Can Pursue a Sustainable and Resilient Recovery World Resources Institute (2020), https://www.wri.org/blog/2020/04/after-covid-19-5-ways-india-can-pursue-sustainable-and-resilient-recovery (last visited May 19, 2020).

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