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Impact of COVID-19 on Indian Economy

 

 

Covid-19 pandemic has badly affected the entire world on all fronts including economy except perhaps China who is being considered a perpetrator for this pandemic due to some ulterior motives. This has been unequivocally stated by the US Prez Trump repeatedly and the same has been overtly or covertly endorsed by many leaders across the globe. India is also a big sufferer due to this COVID-19 pandemic. In such a huge country like India,  due to the lock-down, millions of migrant workers were forced to take the arduous journey of thousands of kilometres from the place of their work to their native places as the employment of these migrant workers dwindled drastically to almost seizer during the initial period of lockdown. India is also hit hard economically by COVID-19. Many institutions and experts are making wild guesses about the contraction of the Indian economy. World Bank has recently projected contraction of Indian economy to 3.2 per cent. 

 

Electricity production/consumption is a major indicator of economic activity in a country and the same is true for India too. So, the major changes in month wise electricity consumption may be used safely to predict the contraction of the Indian economy. During the month of April, May and June of 2020  electricity consumption have reduced to 25.37, 17.57 and 11.87 respectively compared to the same months in 2019.  In India, the consumption of electricity in the domestic sector is around 24.2 per cent. Due to lock-down, domestic consumption of electricity would have not gone down as people were entrapped in their houses. Rather, it would have increased slightly. Therefore, in the study of the impact of COVID-19 on the Indian economy, domestic consumption of electricity needs to be offset in the analysis assuming that no economic activity is taking place at home.  Therefore, after offsetting the domestic consumption,  during the month of April, May and June of 2020  electricity consumption have reduced to 32.59, 22.38 and 15.11 per cent respectively compared to the same months in 2019. But, the way electricity consumption is picking up, it appears by end of September 2020, it will be levelled off with 2019 and then GDP growth rate may pick up. My prediction is that GDP growth rate for India for 2020-21 will be somewhere 1 to 1.5 per cent compared to 2019-20 if further nothing unusual happens on the part of COVID-19.   

 

However, during this pandemic, saving human lives are of paramount importance over GDP growth rate. India needs to take lessons from a war-torn economy for economic development as the current situation is also a warlike situation as it is a manifestation of some sort of covert biological warfare. Therefore, the government needs to focus on food security, universal health care and also territorial security due to unforeseen and unfortunate situation prevailing along LAC ( line of actual control). The agriculture sector needs to be given top priority by providing fertilizer, seeds, agricultural implements and capital to farmers. Health care and defence industries also require full attention. The hotel and local transport industries are in bad shape and this should be re-structured to be integrated into the health care industry so that these assets do not become a non-performing asset and contribute to economy.

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