Every country in the world is Dealing with the unforeseen challenges caused by the COVID-19 pandemic. The economic impact of the 2020 coronavirus pandemic in India was severe. The Coronavirus pandemic had a damaging effect on the Indian economy, which led India’s growth down to 3.1% in the fourth quarter of the fiscal year 2020. India is enduring the worst economic crisis since 1991 and fourth since Independence.
A grinding lockdown caused by the coronavirus pandemic has disrupted business and left millions out of jobs. Reviving the economy needs swift measures, which include increased government spending and a program for robust employment generation and introduce people with new finance business ideas or a new government startup support scheme is needed.
The immediate fall in the GDP
The GDP of India fell to ₹26.9 lakh crore in constant terms. The immediate fall in the GDP was well-expected, but the economy was falling even much before the Covid-19 pandemic. The GDP growth rate for Q4 FY20 was 3.1 percent, and for the full year, it reached 4.2 percent — the lowest in the decade. To bring the economy back to pre-COVID-19 GDP levels, the government will have to increase its spending.
Reason Behind the downfall
The Government of India announced demonetisation on 8 November 2016 of all ₹500 and ₹1,000 banknotes. The announcement of demonetisation resulted in cash shortages, which created significant disruption throughout the economy Demonetisation reduced the country’s industrial production and its GDP growth rate.
The worst impacted segments were organized and unorganized retail.
Demonetization had an enduring effect on Indians MSMEs (Medium, Small, and Micro Enterprises). Many medium and small enterprises shifted towards digitalization an example of such is Jiomart. Demonetization had a significant role in bringing digitalization and financial planning in forefront of many individuals.
GST was implemented on 1 July 2017 by the Indian government. GST was replaced by existing multiple taxes levied by the central and state governments.
GST was the second shock in less than a year after demonetisation. GST was implemented for various reasons one of which was to increase taxpayers but due to its poor design and implementation, it led to a severe shortfall in tax collection.
Many small and informal enterprises found it hard and expensive to comply with GST’s numerous computerized filings and procedures.
One of the positive impacts of GST was that it reduced the cost of doing business. It has revised VAT all over India. GST got rid of various taxes and duties on businesses and is one tax system for all states of India.
The adverse impact of GST was evident in India’s economy. Demonetisation and GST slowed down India’s economic growth from 8.4% in March 2015 to 5.7% in July 2017, as per the ola founder.
The impact of the 2020 coronavirus pandemic in India was severe. It left a severe impact on the Indian economy, leading to a negative growth rate for the first time in decades. India is one of the 15 worst affected economies across the world, estimated a UN report with an approximated trade impact of US$348 million due to the outbreak.
Steps taken by Government of India to recover the Economy
Government of India has taken various steps to recover the economy of the country.
Aatmanirbhar Bharat Abhiyan
The Prime minister of India announced a mega package of Rs20 lakh crores (10 percent of GDP) on May 12, 2020, to help businesses and individuals to cope with the situation created by the Covid-19 pandemic. To complete the mega Rs20 lakh crore packages, the government, on June 20, 2020, also launched an Rs. 50,000 crore rural jobs program named as Pradhan Mantri Garib Kalyan Rojgar Abhiyan.
Global tenders only up to 200 crore rupees
The government of India decided that Global tenders will be disallowed in government procurement tenders up to 200 crore rupees under the Aatmanirbhar package. This move was considered to ensure that local businesses, small and medium ones, don’t face unfair competition from large foreign companies while some fintech startups in india also suffered.
MSMEs now include higher investment limit
The investment limit for micro-manufacturing and service enterprises has been increased to up to ₹1 crore and the turnover limit to up to ₹5 crores, previously which was ₹25 lakh and ₹10 lakh for the service sector.
Is India Heading Towards a Recession
India’s GDP growth has expectedly contracted 8.6 percent in the second quarter this financial year, presenting the economy in a state of recession. This signifies that India will enter into a recession for the first time in history with two successive quarters of negative growth due to the COVID-19 pandemic. Several lockdowns were imposed due to the pandemic which severely hampered economic activity.
Demonetization and GST had a harsh effect on the local market especially the unorganized market which contributes almost 90 percent to the total employment of our economy.
After the spread of coronavirus and more than 3 months’ stringent lockdown economy is in an uncertain situation. The time has come when the government has to take some hard decisions about the welfare of the nation. The government should also work in the healthcare sector to tackle down such health problems smoothly in the future.