The economic impact of the COVID-19 pandemic in the India has been largely disruptive, adversely affecting travel, financial markets, employment, shipping, and other industries. The quarantines and Lockdowns that are needed to fight the virus’s Spent are freezing the economy, too, with unprecedented force and speed. The stock market has sunk a quarter from its peak Last month, wiping out three years of Gains. Last week, meanwhile, brought news that a 122 million Indians lose their jobs in April glone, the highest number ever recorded. Unemployment is Neoware faster than it did during the 2008 recession, 9 sign the economy is headed toward recession.
How Long ss the COVID-19 slump likely
to last?
India's unemployment rate is wow at a
record high of 27.1%, according to the Centre for Monitoring the indian Economy
(CMIE).
To understand COVID-19's hit on the
economy, consider its effect ow different industries. Consumption has slumped
as businesses close and as households holds
off on major purchases as they worry about their finances and their
Jobs. Businesses are putting off investment as they wait for clarity ow the
full cost of COVID-19. Arts, entertainment, recreation and restaurants
constitute 4.2% of GDP. With restaurants and movie theatres closed, this figure
will now be closer to zero until the quarantine are lifted. Manufacturing makes
up 13.72% of India GDP, but much of this will be disrupted, too, because global
supply chains have been obstructed by factory closures and because companies
are shutting down factories in anticipation of redused demand. Maruti,
Mahindra, Toyota Kiirloskar Motor, Tata Motors, Kia Motors and MG Motos, for
example, have been announced temporary closures of car factories. As business rack
up losses due to closures, layoffs have already followed. Indian small business
will especially struggle to keep staff on the payroll as their revenue slumps.
One key rie is the number of business
that are forced to close during the lockdowns. The more business closures and
the more layoffs that result – the higher the cost of the crisis will be.
Unemployment will increase, and the higher it goes, the less likely consumption
is to immediately recover after the lockdowns end.
The other major risk to the economy
is that the health crisis is accompanied by a financial crisis. The immediate
negative effect of COVID-19 on GDP is likely to be far more substantial than
the 2008 crisis caused many years of slow growth because of the huge financial
disruptions that resulted, as banks suffered losses and cut back lending –
usually a key driver of growth – as a result.
India’s gross domestic produact (GDP)
could contract between 3% and 9% in the current fiscal year depending on the
effectiveness of the steps taken to contain coronavirus infections and the government’s
economic policy responses.
Even before
pandemic, India’s GDP statistics have been a source of contention. A change in
the methodology to calculate GDP introduced in 2015 made forecasting difficult,
promoting some economics to use their own trackers of high frequency indicator,
which compare more closely with the old GD series. Some are now relying on
proxies to estimate output in the three months to June.
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