This article is written by Charul Mishra, a student pursuing B.A.L.L.B. from Symbiosis Law School, Hyderabad. In this article, the author has dealt with the effect of novel coronavirus on the working of Trade and Economy around the globe with a special focus on the condition of India.
Table of Contents
Introduction
A world health emergency due to COVID-19 was declared by the World Health Organization in January 2020 which was said to have emerged from Wuhan, China. This was further detected in over 190 countries and all the states of India. The virus infection has sickened more than 3.9 million people over the globe out of which 182 thousand alone are in India. Over 80 countries have shut down their national boundaries to people arriving from infected countries, requested businesses to close, urged their populations to quarantine themselves and shut down the educational institutions to an approximate of 1.5 billion children.
This has led to strict lockdown in various countries to restrict the movement of people to decrease the rate of infection in every country. Due to lockdown, there was a huge effect on the global production and supply chain and ultimately the global trade and economy. The restrictions in the production of services, as well as their movement from one place to another especially cross-border transportation, have created hindrance in the development of the economy and trade practice.
Effects of Coronavirus on various sectors of Economy
The broad range of possible options for the expected decline is understood by this health crisis’ unparalleled nature and the ambiguity about its precise economic impact. But World Trade Organization economists believe the collapse in the economy is likely to exceed the trade decline triggered by the 2008‐09 global recession. Projections of the expected recovery in next year are equally unpredictable, with results primarily based on the duration of the pandemic and the efficacy of the government policies. This pandemic is primarily a health care and drug shortage issue and has prompted authorities to implement drastic action to protect the lives of people. In addition to the human hardship due to disease itself, the WTO also stated that the inevitable collapse in trade and output will also have damaging consequences for residents and companies.
Thus, it becomes important that the aim of the countries and their leaders should control the pandemic as soon as possible and alleviate the economic damage to the people, companies of the people of their country. The lawmakers and the administrators must start planning for the aftermath of the pandemic. Although, already huge loss has happened in most countries still there is a space for betterment. The following are the sectors where the economy is most affected due to COVID-19:
Chemical Industry
Various Chemical plants and factories have shut down in many important countries including China. Due to lockdown, even the transportation and shipment of the products is also restricted. Due to this, the market has fallen, not only because people are buying what they need but also, the market has nothing to sell due to a lack of raw material. At least 20 per cent of production and supply was affected by the decline in the supply of raw materials. For example, China is an important supplier of indigo which is raw material for making denim. Countries like India will be greatly affected as it will face major losses due to the lack of such raw material. However, it is a chance for other countries to diversify their markets. But this would take a lot of time and effort.
Shipping Industry
Coronavirus outbreak has also impacted the business of cargo movement service providers to a great extent. According to registered sources, more than 75-80% in dry bulk trade.
Auto Industry
The impact of the novel coronavirus on Indian Companies concerning the Auto Industry would depend upon the extent of the business with China. However, the number of workshops and factories for the Automobile parts is sufficient to dispose of the current need of the Automobile services for the Indian Industry. But if the lockdown continues in China, it is expected that it would lead to the 8-10% contraction of Indian auto manufacturing.
Pharmaceuticals Industry
Even after being among the global highest drug exporters, India’s pharmaceutical industry is dependent on the shipment of bulk drugs. It will also be affected because of the COVID-19 pandemic. Also, due to a lack of medicines and drugs, it would become very difficult for the country to overcome the downfalls in the health sector of the country due to COVID-19.
Textiles Industry
As a result of the coronavirus pandemic, so many clothing/textile manufacturers have delayed operational processes which, in turn, have affected export markets of cloth, yarn as well as other raw materials from India. The textile industry is the most important sector of the economy in India as it covers one of the major economic values in India.
Solar Power Sector
Indian developers may face some shortfall of raw materials needed in solar panels/cells and limited stocks from China. Although the need for Solar is not much in the present as it will be in the future, the uncertainty of such factors has created a serious worry for the companies dealing with these sectors.
Electronics Industry
The major supplier for the supply of electronic products in India is China. China provides both the raw material and the completely produced electronics to India. India’s technology sector may experience supply shortages, manufacturing reductions in input costs due to the heavy reliance on the direct or indirect supply of electronic parts and domestic industries.
Information Technology Industry
The Information technology industry is challenged by the COVID-19 as it is the most utilized sector at such times. The Information Technology Industry requires various immediate developments to compete with the present times.
Tourism and Aviation
Tourism and aviation are two major sectors that are majorly affected due to lockdown. Due to zero of the low mobility of the public, the tourism sector is not getting any profits. Similarly, people are not travelling anymore from one place to another due to which transport utilization has come to minimal use.
Effects on the economy of India
Recently, The Federation of Indian Chambers of Commerce and Industry (FICCI) conducted few surveys and took responses from at least 380 companies about the loss which they are facing in the present or might face in the future due to the advent of COVID-19. The organization stated that they are going through a condition where they are uncertain about the future. According to the survey, COVID-19 is having a huge impact on Indian businesses and the trade is at high risk because firms are facing some reduction in manpower. Further, the COVID-19 crisis has already caused unparalleled destruction in economy and trade practices over the last few weeks. The present situation is having a deep impact on their business. Further, 70 per cent of the surveyed firms are expecting a downward growth sales in the fiscal year 2020-21.
COVID-19 has disrupted human lives and global supply chain but the pandemic is in an immediate need of the strategies for recovery of the Indian economy that was present till the very end of 2019 and starting of 2020. The revised Gross Domestic Product (GDP) estimates for India downwards by 0.2 percentage points for the fiscal year 2020 to 4.8 per cent and by 0.5 per cent for the fiscal year 2021 to 6 per cent. Furthermore, it is mentioned that the magnitude of the real effect will rely heavily on the intensity and duration of the pandemic.
The major impact faced by the Industries in India and various companies is due to three factors including linkages, supply chain, and macroeconomics. According to a registered Data, at least 6,606 Indian bodies that have legal connections with industries in countries with a huge number of confirmed COVID-19 cases. And economic production in foreign markets is inefficient, which has a detrimental effect on the depth chart of these companies. Industries that would have been much impacted include logistics, automotive, tourism, metals, pharmaceuticals, electronic goods, small and medium-sized enterprises and retail, among many others.
Further, according to the World Bank’s assessment, India is expected to grow 1.5 per cent to 2.8 per cent. The IMF forecasted India’s GDP development of 1.9% in 2020 because the world economy is impacted by the COVID disease outbreak, the very worst recession since the Great Depression of the 1930s. Furthermore, we can not overlook the fact that the locking and disease outbreak hit a number of sectors, such as MSME, hospitality, civil aviation, agricultural production and related activities.
The lockdown in India will also have a significant impact on the economy, mainly on supply, which is the largest component of GDP. A decrease in the supply of industrial goods & services may lead to a drastic decline in the usage of basic commodities. It would become worse if the disruption caused by the 21-day lockdown would affect the availability of essential commodities too. Due to weak intra-national consumption and low service utilization, there can be a delay in the needed investment which would further add pressure on the growth. This can not be overlooked that, after COVID-19, several other markets are anticipated to implement de-risking techniques and switch their manufacturing facilities from China. This could open up opportunities for India. Possibilities will primarily depend on the rate at which the economy recovers and the speed at which production capacity and supply chain issues are addressed.
Need for new economic strategies
Since it is discussed how the novel coronavirus has affected various economic and trade sectors in India, there is a need for new economic strategies to cover up the loss happening in the present so that in future, the working of industries come to normal. For coming up with the strategies, the Central government will play a great role as it is the one that will come up with improved industrial plans as well as regulatory legislation for the same. One of the major strategies which can be applied by the Centre is using Big Fiscal Stimulus. By doing this, the citizens of the country would be able to revive in terms of economy. The second strategy which can be used by the government is that it should prepare funds for the unpredicted need of the country so that the country does not face any unusual problem. Providing Tax relief to the troubled sectors of the country can be another sector to revive the downfall in the economic condition of the country.
Apart from this, the Industries and the companies must be asked to protect the jobs of their employees so that the unemployment rate of the country does not increase as it would hugely affect the Indian economy. Concerning the material supply during the period of lockdown, the administration should ensure the supply of essential services like food, general commodities, safety measures, etc. Income support should be provided to the families who became unemployed due to lockdown like rickshaw drivers, vegetable vendors, small service providers, etc. In the present times, the administration should play a major role in the development of the economy of the Country.
Conclusion
Taking into consideration all the above heading, it is concluded that the situation in every country on this globe is very delicate and needs urgent strategies, especially to the economy and trade sector. The Government and the administrator are the ones who play a major role in improving the situation of the country. Concerning every sector including electronic industry, Aviation and Tourism Industry, Textile Industry, Information, and Technology Sector, Automobile Industry and the transportation industry, there are specific monitoring required to the need of the particular sectors and to find the solution for such need for immediate use or long term requirement. One thing has to be understood, there are various issues and problems where both the companies in the respective sectors and the government should work together and look out for better options to come up with a better and successful strategy.
References
- https://www.who.int/.
- https://www.cdc.gov/coronavirus/2019-ncov/index.html.
- http://ficci.in/.
- https://www.ibef.org/economy/indian-economy-overview.
- https://openknowledge.worldbank.org/handle/10986/13547.
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