The outbreak of Covid-19 epidemic and its rapid spread among all the states of India has presented fresh challenges for the Indian economy causing a severely disruptive impact on both demand and supply-side elements that has the potential to derail India’s growth story in a significant way. Though the economy grew at a rate of 4.7 percent, a six-year low, in the third quarter of the financial year 2019-20, there was a strong hope of recovery in the last quarter of the financial year 2019-20 because of the number of stimulus measures initiated by the government to bring back the economy on the growth trajectory. However, the new Covid-19 epidemic outbreak has made a recovery extremely difficult in the near to medium and long run.
World Bank and credit rating agencies have downgraded India’s growth for the fiscal year 2021 with the lowest figures India has seen in three decades since India’s economic liberalisation in the 1990s. However, the International Monetary Fund projection for India for the financial year 2021-22 of 1.9 percent GDP growth is the highest among G-20 nations. Within a month, unemployment rose from 6.7 percent on March 15 to 26 percent on April 19. During the lockdown, an estimated 14 crore people lost employment. More than 45 percent of households across the nation have reported an income drop as compared to the previous year.
The Indian economy is feared to have lost over INR 32,000 crore (US$ 4.5 billion) every day during the first 21 days of complete lockdown which was declared following the coronavirus outbreak. Under complete lockdown, less than a quarter of India’s $2.8 trillion economy was functional. Up to 53 percent of businesses in the country have been significantly affected. Supply chains had been put under stress with the lockdown restrictions in place; initially, there was a lack of clarity in what was ‘essential’ and what wasn’t. Those in the informal sectors and daily wage groups were the most at risk. A large number of farmers around the country who grow perishables were also affected. Various businesses, such as hotels and airlines, are cutting salaries and laying off employees. The live events industry has seen an estimated loss of INR 3000 crore (US$420 million). The resulting domestic supply and demand disruptions (on the back of weak external demand) are expected to result in a sharp growth deceleration in FY 2020-21.