Effect of Coronavirus on the economy


Coronavirus pandemic has created huge disruption on the economy. India’s growth for the fiscal year 2021 has been downgraded by credit rating agencies. Coronavirus has degraded the economy throughout the world. It has deeply affected the economy at both macro and micro levels. Many employees are losing their jobs or facing salary cuts. Some businesses are deteriorating. India may have a negative growth rate for the financial year 2021. Let us look at how Coronavirus has affected various parts of the economy.

Change in FDI rules

India changed its Foreign Direct Investment (FDI) policy on 18 April 2020. This will prevent acquisition of Indian companies due to Coronavirus pandemic. As the global share prices have decreased, China may take advantage of this situation. This can lead to hostile takeovers of Indian companies. The new FDI policy has restricted countries but not markets. The Ministry of Commerce and Industry will now scrutinize all FDI from countries which share land border with India. The Government of India is trying to allure companies which are looking for an alternative to China. So, companies have been told to make their pro-investment strategies ready.

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Effect on agriculture

Due to lockdown, people are restricted from buying vegetables and fruits. This has caused the perishable products to degrade which led to loss. Farmers all over the country are facing uncertainty. Tea estates faced logistical problems because of which they were unable to harvest. The Darjeeling tea-based industry is facing loss and tea exports may drop as a result. After the lockdown guidelines got relaxed, some agricultural businesses have reopened. They include tea, coffee, dairy and rubber plantations.

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Effect on manufacturing

Major Indian manufacturing companies have reduced their operations due to Coronavirus pandemic. They have either temporarily suspended or significantly decreased their operations. The companies include Ultra Tech Cement, Larsen and Toubro, Grasim Industries, Tata Motors, Bharat forge, Aditya Birla Group and Thermax. Companies that produce iPhone have also suspended some of their operations. Almost all two-wheeler and four-wheeler companies have halted production till further notice. Some other companies have also suspended production following lockdown orders.

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Effect on E-commerce

The business of E-commerce companies has been affected because of logistical problems due to lockdown. Amazon has stopped the sale of non-essential items in India. It is only selling the essential needs of customers. Flipkart has temporarily suspended some of its services and is selling only the essential products. Bigbasket and Grofers have restricted their services and their business has been disrupted. Delivery agents of E-commerce companies were issued curfew passes to carry on the supply chain. Swiggy and Zomato are not allowed to operate their services in this time.

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Effect on defence

The Department of Military Affairs has postponed all capital acquisitions due to Coronavirus pandemic. There will be no major deals in defence during the beginning of this financial year. The delivery of S-400 missile systems will not be affected but the delivery of Rafale fighter jets may get affected.

Effect on stock markets

Stock markets have been affected because the companies are having losses. Stock market in India had worst losses in history on 23 March. SENSEX and NSE NIFTY fell by many points. However, the situation improved in few days. SENSEX had its highest gains in 11 years on 25 March. The stock markets in India rose again on 8 April. Nifty held the 9500 mark by 29 April. The stock market has become stable after having losses.

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Effect on supply chain and logistics

Lockdown has broken down essential supply chain and logistics. Inter-state movement of raw materials is necessary for the food processing industry. That’s why the Managing Director of Britannia industries requested Government to allow inter-state movement of raw materials. Otherwise this supply chain problem could have caused shortage of food. The movement of medical goods has declined due to disruption in supply chain.

Effect on salaries

The salaries of many employees are being cut in some organisations. The Prime Minister of India urged high- and middle-income segments of society to donate some money. People are donating money to Prime Minister Relief fund. In some states where the impact of Coronavirus pandemic has been too high, donation to Chief Minister Relief fund has also been made. Government bank employees faced salary cut of one working day from their monthly salary. Prime Minister told to give the salary of domestic help. He requested companies to keep paying the employees.

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Effect on migrant workers and labour force

Daily workers have lost their work due to Coronavirus pandemic. They do not have any fixed monthly salary. Because of lockdown, they are not able to go out and work. Lockdown has halted the movement of vehicles. It includes trains, buses, taxis, autos and metros. After the imposition of lockdown, many migrant workers had to return to their homes. They ended up walking to their homes, which were large journeys. Then Central Government took measures to improve the condition of labourers. The migrant workers and labour force are being provided with food and medical essentials like masks, medicines and sanitizers.

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Effect on trade

China is the largest exporter and second-largest importer in the world. Because of Coronavirus pandemic, China’s condition will impact the industries of India. India depends on China to a great extent in imports. China has a significant share in the top twenty products that India imports from the world. India imports organic chemicals, inorganic chemicals, dyes, medicinal and pharma products from China. Due to the COVID-19 crisis, import dependence on China will have considerable impact on Indian industry. China is the third largest export partner of India and accounts for nearly 5% share. India exports plastics, cotton, fish products and ores to China. Trade in terms of import and export is worsening.

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Effect on Indian companies

Many Indian companies have their offices in foreign countries also. Some companies work for foreign clients and get payment from them. Coronavirus pandemic has greatly affected multinational, global and transnational companies. It is because Coronavirus has spread throughout the world. Companies have decreased their operations since their employees in all locations are unable to work now. Organisations are having losses now and they will need time to recover from this crisis. Due to this they have stopped recruiting new employees and are deducting the salaries of existing employees.

Effect on students graduating in 2020

Coronavirus pandemic has disrupted the career of students who completed their course in 2020. Some students who had got placement offers in their college recruitment process have lost their offers. Internship offers of students are getting cancelled due to Coronavirus pandemic. Students of numerous colleges are facing hardship now. This is applicable to students studying any field of education. Those companies who have not cancelled the placement offers, will delay the joining of 2020 pass out students. Because of these students and their families are suffering.

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COVID-19 crisis has led to an unknown collapse in economic activities. It is having a very high impact on business. Due to Coronavirus pandemic, businesses are having uncertainty about future. The severity of this outbreak will decrease the GDP of India.


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