Indian
Economy one of the fastest growing economy leading the world mainly in
Information Technology Sector. India is also having 5th largest GDP
share in the world economy. India is also having second largest population
followed by China. Indian Economy is standing on two pillars, one is Formal
Sector & another is Informal Sector. Formal sector mainly includes White
collared jobs and people who are on roll in their employer organisation’s
payroll register while Informal Sector mainly includes Blue collared jobs and
it also involves people who are nowhere registered either as an employee or as
a part of work force. These unrolled people includes construction workers,
Rickshaw puller, loaders, farm labour, vegetable or fruit seller, small
retailers like pan shop, small groceries shop, plumbers, sanitary workers,
household helpers, drivers, tourist guide and like. These are main contributors
in the total GDP of the country. Their earnings are less but these people are
the sources of actual cash flow in the economy as they earn majorly in cash and
so is the pattern of their expenses. Any impact either positive or negative
directly impacts the GDP of the country in the manner in which they are
impacted. Impact on GDP is directly
proportional to the Impact on the Informal Sector of the economy.
Nowadays global economy is negatively
impacted by Corona Virus or Covid-19. Corona Virus have reached every corner of
the globe and have impacted life and
livelihood of the human beings. As this Covid-19 is communicable disease so
people are suggested not to roam here and there if not necessary and use mouth
mask to cover their nose and mouth. This disease is somehow more dangerous as
carrier of this virus may not be impacted by such virus but it may impact other
people who may come in contact with such person. This makes this Corona Virus
more deadly as compared to other viruses. To overcome such health problem and
to break or dilute such spread chain government have opted for the plan of
Lockdown which was the necessity of time as we are the second largest
population and if virus is spread at community level things would have turned
into disaster but with the timely step by government this was controlled and
will be managed in future also. This lockdown have resulted into lockdown in
factories, management offices, construction site, closure of tourist spots,
blockage of logistic chain and like. This Lockdown have impacted Informal
economy largely as workers or labourers in spite of urge by government to stay
where they are have migrated to their home towns or villages. This have resulted
into demographic changes in their working states as well as home states.
Government is providing food articles, medicines and other relief material both
in the form of monetary and non-monetary relief and will be providing for the
next two-three months. Problem is not about the current scenario as everything
is and will be provide by the government through its machinery, actual problem
will arise after this lockdown will be opened. As we cannot depend on the
government for each and everything in the long run as it is already spending
huge amount in the healthcare sector to save the lives of its citizen and also
providing basic necessities to each and every citizen in actual need. Problem
is about to come which will be more harsh to be dealt with.
Each & Every sector is negatively impacted
by this Corona Virus may it be Tourism, Manufacturing, Managerial Services,
Export, Mining, Logistics, Education, Healthcare, Banking Sector, Aviation Sector,
Petroleum Sector etc. People have
migrated to their home towns (Reverse Migration) that will result into more
deployment of resources by their home state governments. This will also lead to
increase in demand employment and monetary relief in the long run if they are
not provided with employment. Tourism
sector provides livelihood to all directly and indirectly to many people
starting from cab driver to luxury hotels. There are various regions and even
states who are mainly dependent on tourism for their revenue and this virus
have create so much fear that it will take time to rebuilt the confidence. Same
is with the Food & Beverages Sector
people will be more cautious and will demand more hygiene both in the kitchen
as well as in the dining area. This will lead to decrease in income of road
side vendors and small restaurants. They will be impacted for the long
duration.
Manufacturing Sector may see
retrenchment in the coming months. People will be earning less therefore will
be spending less that will result into less demand leading to less manufacturing
leading to retrenchment of workers as well as employees. This will mainly
impact Automobile Companies, Electronic Durables like Air Conditioner. Construction Sector will be the most
affected sector leading to heavy losses to their owners and promoters, loss of
jobs, non-payment of dues to Banks and NBFC. This sector was already not
performing well and this virus have compelled them to stop their operations and
in the coming days demand will be low as compared to expectations leading to
overall loss to this sector. Petroleum
Sector, we as country were already paying huge amount in the form of import
of crude oil. At this time when Crude oil is at its lowest price we cannot
Ancash the benefit from the same as logistics chain is interrupted leading to
less demand of Diesel or Petrol. In the coming days we will be paying more
amount in the form of Forex. Export
Sector globally export orders have been either cancelled or deferred for
the time being leading to reduction in Forex receipts. Leading to fluctuation
in Forex Reserve. Logistics Sector, logistics
are the backbone of any industry as goods and passengers are to be moved from
one place to another. Logistics sector provide income to drivers, helpers,
roadside vendors mainly informal sector workers. Their incomes will be
regularised but will take some time. Banking
Sector as all others sectors are showing downward graphs this will result
into less or delayed payment of dues to bank it may be possible that various
MSME entities are converted into NPA due to default in payment of dues. Even if
scheduled banks are less affected, its effect on NBFC cannot be projected as
their mode of loan disbursement is already doubtful and questionable, how they
will be recovering their dues time will tell us. Farmers are also affected by this they are unwillingly selling
their yield at lowest cost so that they don’t have to throw them as garbage. There
are segments which are less impacted, this includes FMCG, Pharmaceuticals. Each
and every sector is impacted, that impact may vary on the scale of impact.
It is visible that Central as well as State
governments have to provide both monetary as well as non-monetary benefits to
the affected people for the next two-three months. They will also have to deal
with the problem of retrenchment of workers by their employers. Each sector is
in need of economic package to cope-up with such a virus. Banking sector is
afraid of NPA. Aviation Sector is afraid of its International flights. Governments
have to take steps keeping in view both social impact as well as economic
impact on the economy as a whole, as informal labour is the one which is the
main ingredient of nations GDP. Government is already burdened with its Fiscal
deficit and the measures which it is taking will need more money which means
either it has to curtail its other expenses or have to borrow money from other
International organisations. As whole world is suffering from this virus so we
cannot depend fully on International sources like IMF or World Bank. We have to
curtail our expenses and have to priorities the same within the given time
frame. Government have to deal with the Reverse Migration after lockdown is
over. People who have come back to their home towns have to be provided with
employment else with monetary reliefs this will again burden the government
treasury. Government have to take initiative to improve its healthcare
infrastructure at the grass root level, i.e., villages. Education
Infrastructure should also be improvised so that citizens should be well aware
about their hygiene, importance of healthcare services and their overall well-being.
This situation is both a Threat as well as Opportunity. We have to control and
get rid of corona virus this is a threat but by installing permanent world
class healthcare infrastructure we can deal with other diseases also in more
accurate manner like Tuberculosis, malnutrition, Cholera, jaundice etc. But
more or less government should be ready to provide economic package mainly to
the segments or sectors which provide employment in informal sector. Relief
should be provided in such a manner that Cash is floated in the economy to
increase the demand that will result in increase in supply which will result in
more production, more employment and finally more income for both government
and its citizen. After all government and citizens are synonyms in a democratic
country like India.
Sanidhya Pastore
http://taxnotify.com/indian-economy-in-this-era/
