Impact of second wave of COVID-19 in Indian Economy, WILL IT SURVIVE?
Due to the second wave of Covid-19 and lockdown, India witnessed slow economic growth, but there is hope that soon it will improve as the number of new cases of coronavirus has started falling. We expect a reduction in the annual GDP growth rate but the economy will still expand though not as fast as was expected.
Some of the factors having an impact on the slow growth of the Indian economy during Covid are:-
- There is a fall in income as well as in consumption. Unemployment in urban India has fallen from 33. 56% on 9.05.21 to 31.55% on 16.05.21, and similar for rural India during this period. Unemployment and the death of the breadwinner in some families lead to an income shock that led to a fall in demand.
- According to a research report, the second wave will hit the economy by prompting customers to save rather than spend. The economic drag from the pandemic in the current quarter will be dominated by demand destruction or deferment of expenditure, said Yuvika Singh, an economist who downgraded her growth forecast for this year by 150 basis points to 10%.
- Some sectors like tourism, restaurant, entertainment, hotels, saloon and spa, gyms are no longer available so there is a decline in consumption, but as the global economy is picking up and trade and exports showed 80% growth in the first week of May, the RBI said that the impact
of the second wave on the real economy seems to be limited so far in comparison with the first wave. It said that the localized nature of lockdowns, better adaption of people to work from home, online delivery models, e-commerce, and digital payments were at work.
- The most worrying factor at present is rising poverty, globally as well as in India for the first time in the last 20 years due to disruption by the pandemic. The number of people under the poverty line increased to 50 million in India and 95 million globally which is, as per the World Bank, expected to rises to 150 million by the end of 2021.
-According to the second advance estimates, 2020-21 is expected to suffer a GDP contraction of 7.96%. However, there is hope for economic recovery and stabilization as unlike the first wave, we have vaccines this time and now the situation of the health care system is much better.
But some factors that help speed up the Indian economy are:-
- Prime Minister’s Atamnirbhar Bharat Abhiyaan combined relief, policy reforms, and fiscal and monetary measures to help businesses. A mega package of Rs.20 lac crore was announced for this purpose.
- A rural jobs program named Pradhan Mantri Garib Kalyan Rozgar Abhiyaan aimed at creating livelihood for jobless migrant works who moved back to villages during the lockdown.
- Farmers were allowed to conduct a farming operation to maintain continuity in the supply chain.
- Low crude oil prices reduced the import bill making the current account deficit in the balance of payments more manageable.
- Of late India has become an attractive destination for foreign investment owing to its large consumer market, availability of skilled manpower, and a package of fiscal incentives for foreign investors.
- Improvements in Asian stock markets and America’s stimulus package increased the investor’s sentiments in the Indian stock market and it is working at an all-time high.
- The political stability and comfortable reserves in foreign exchange will help speed up the Indian economy. With a gap between demand and supply, as most manufacturing units are not working, inflation is also a worrying factor.
- RBI has announced many relief measures like low-cost loans to SMEs and a moratorium of EMIs provided liquidity through low Repo and Reverse Repo rate will certainly help the manufacturing units. Moreover, a speedy vaccination drive will allow the people to come out from homes and enable them to lead a normal life, doing the work as before Covid.
This will soon increase the demand and boost the supply which will ultimately revive the economy of India.