FinanceCOVID-19 and its Impact on the Indian Economy

COVID-19 and its Impact on the Indian Economy

Coronavirus outburst was first listed in Wuhan, China on 31 December 2019. Before reading in detail about the consequence, first, let us review about coronavirus. Coronavirus disease (COVID-19) is a contagious disease induced by a newly discovered coronavirus. It has been seen that most of the people infected with the COVID-19 virus will encounter mild to typical respiratory ailment and recover without needing particular treatment. Older people and those with primary medical issues like cardiovascular disease, diabetes, persistent respiratory disease, and cancer are more inclined to develop severe illnesses.

WHO is operating jointly with global experts, governments, and other health institutions to procure recommendations to the countries about precautionary and preventive measures. To combat COVID-19, the Indian Government implemented a lockdown in the country till 3rd May.

Recently an industry census asserted that businesses are grappling with “tremendous uncertainty” about their future. According to the statistics, COVID-19 is having a ‘profound impact’ on Indian companies. Over the following month’s jobs are at high risk because corporations are looking for some deduction in the workforce. Ficci revealed in a statement, “The survey highlights that unless a substantive economic package is announced by the government immediately, we could see a permanent impairment of a large section of the industry, which may lose the opportunity to come back to life again.”

Other Major survey results are-

1. A crucial 53 per cent of Indian businesses implies the marked impact of the COVID-19 pandemic on business undertakings even at the initial stages. The pandemic has considerably impacted the cash flow at institutions with almost 80 per cent, documenting a reduction in cash flow. The pandemic has had a crucial consequence on the supply chains as more than 60 per cent of respondents demonstrate that their supply chains were affected. The firms also brought out that they are closely monitoring the circumstance and foresee the impact of the pandemic on the global market and the supply chain to deteriorate further.

2. Organizations have brought in a revived focus on hygiene aspects pertaining to the pandemic. Almost 40 per cent have put in place strict checks on people reaching their bureaus and disinfection. Approximately 30 per cent of institutions have already put in place Work-from-Home policies for their employees.

3. Almost 4 per cent of the respondents think that it could take up to 3 months for normality to return.

For some of the sectors, the work-from-home concept is posing performance challenges as it has an explicit bearing on the business operations. This is especially valid for manufacturing units where workers are required to be physically attending to the production sites, and services sectors like banking and IT where lots of confidential data is utilized and distant working can enhance security risks.

Hence, companies employing in these sectors are finding it hard to enforce work-from-home facilities without compromising on their day to day undertakings.

Implications on the workforce

Job losses and salary cuts are inclined in the high-risk services sector, including airlines, hotels, malls, cinemas, restaurants, and dealers, which have seen an intense decline in demand due to lockdowns across the country. If the recent global and domestic economic deceleration persists, it will affect demand and completion. Indeed, with this crisis affecting the business around the country, it will generate extremely challenging problems for the workforce. Firms are not fulfilling revenue targets. Hence, compelling employers to cut down their workforce.

According to a prior assessment report, practical 25 million jobs could be lost worldwide due to the coronavirus pandemic. Still, an internationally harmonized policy outcome can help reduce the effect on global unemployment. While on the one hand, Indian employees are failing their jobs and suffering a salary cut, there is another belief that the majority of ex-pats have left back from India and they will take time to return.

In the context of trade, China is the world’s largest exporter and second-largest importer. It reports 13% of world exports and 11% of world imports. Up to a large magnitude, it will impact the Indian industry. In imports, the reliance of India on China is significant. Of the top 20 products that India imports from the world, China reports for a considerable share in most of them. India’s total electronic imports account for 45% of China.

Approximately one-third of machinery and nearly two-fifths of organic chemicals that India buys from the world come from China. For automotive parts and fertilizers, China’s stake in India’s imports is more than 25%. Approximately 65 to 70% of active pharmaceutical elements and around 90% of specific mobile phones come from China to India. Thus, we can say that due to the recent outbreak of coronavirus in China, the import reliance on China will have a crucial impact on the Indian industry.

In terms of export, China is India’s 3rd largest export partner and funds for approximately 5% share. The influence may result in the following sectors, namely organic chemicals, plastics, fish products, cotton, ores, etc. We also can’t avoid that maximum of the Indian companies are situated in the eastern part of China. In China, about 72% of corporations of India are discovered in cities like Shanghai, Beijing, regions of Guangdong, Jiangsu, and Shandong. In various sectors, these firms work, including Industrial manufacturing, manufacturing services, IT and BPO, Logistics, Chemicals, Airlines, and tourism.

It has been witnessed that some sectors of India have been influenced by the outbreak of coronavirus in China, including shipping, pharmaceuticals, automobiles, mobiles, electronics, textiles, etc. Also, a supply chain might influence some disturbances associates with industries and markets. Overall, the effect of coronavirus in the industry is reasonable.

Confederation of Indian Industry put forth the impact analysis for various sectors:-


The consequence would rely on the extent of their business with China. The shutdown in China has restricted the import of several components influencing both Indian auto manufacturers and the auto component industry. Nonetheless, current levels of index seem to be adequate for the Indian industry. In case the shutdown in China persists, it is foreseen to result in an 8-10 per cent compression in Indian auto manufacturing in 2020. Yet, for the beginner EV industry, the consequence of coronavirus may be tremendous. China is prominent in the battery supply chain, as it shares for around three-quarters of battery manufacturing potential.

Information Technology-

The extended shut down due to COVID 19 in China have adversely affected the revenue and growth of domestic IT companies, managing out of China. IT companies are heavily hanging on the workforce and are not able to regulate due to constraints in the movement of people occurring from lockdown and quarantine issues. Accordingly, they are not able to complete or deliver the current projects in time and are also waning new projects. Further, the global customers for Indian IT companies in China have begun looking for different service providers in alternate locations such as Malaysia, Vietnam, etc.

Tourism & Aviation-

The spread of coronavirus has also influenced the aviation sector. The outbreak has urged domestic carriers to abolish and temporarily cancel flights regulating from India to China and Hong Kong. Indigo and Air India have stopped operations in China. The provisional suspension of aviation to China and Hong Kong would oversee domestic carriers missing out on gross revenue targets.

Chemical Industry-

Some chemical plants have been closed in China. So there will be constraints on shipments/logistics. It was found that 20% of the output has been influenced due to the disturbance in raw material supply. China is the leading supplier of Indigo that is needed for denim. Business in India is inclined to get affected, so people aim at conserving their supplies. Though it is a chance, the US and EU will try and modify their markets. Several of the business can be diverted to India, which can also be taken as a great boon to the shipping Industry. Coronavirus outbreak has affected the business of cargo movement service providers. As per the references, per day per vessel has decreased by more than 75-80% in dry bulk trade.

Solar Power Sector-

Indian innovators may encounter some shortfall of raw materials desired in solar panels/cells and limited stocks from China.

Electronics Industry-

The primary supplier is China in electronics occurring a final product or raw material used in the electronic industry. India’s electronic enterprise may face supply disturbances, output, deduction effect on product prices due to colossal dependence on electronics element supply directly or indirectly, and local manufacturing.

According to KPMG, the lockdown in India will have a sizable consequence on the economy, particularly on consumption which is the most significant component of GDP. Reduction in metropolitan marketing can direct to an immediate fall in the consumption of non-essential goods. It can be severe if disturbance causes by the 21-day lockdown and involve the availability of crucial commodities. Due to vulnerable domestic consumption and customer sentiment, there can be a delay in investment which further adds stress on the growth.

We can’t avoid that post-COVID-19, some economies are anticipated to adopt de-risking strategies and shift their manufacturing bases from China. This can create opportunities for India. According to KPMG, opportunities will significantly depend on how quickly the economy recovers and the rate at which the supply chain issues are addressed.

According to the KPMG report “It is anticipated that the course of economic recovery in India will be steadier and rapidly than that of many other advanced countries”.

Deepansha Adlakha
Deepansha Adlakha
I am a B.Tech CSE student of Amity University Noida. I have been doing many projects on content writing and writing articles for school magazines. Moreover, I have good typing skills and reasonable proficiency in the English language.

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