prpri Impact of COVID-19 (Corona Virus) on Indian Economy Impact of COVID-19 (Corona Virus) on Indian Economy


It is said that everything comes with a cost and the ongoing Corona Virus Pandemic is the cost that the nations are bearing for Globalization. The Corona Virus has travelled from China to Europe to United States of Amercia to our country.  Corona Virus has not just rattled lives, but also economies across the world and our country, has not been spared either. It is no longer only a global health crisis, it is also a major labor market and economic crisis that is having a huge impact on people. In India, with the intent to contain the spread of Covid-19, our Hon’ble Prime Minister had announced a nationwide complete lockdown of 21 days w.e.f. 25th March, 2020. But, as spike in corona cases continued, the PM again, announced that the lockdown to be continued till 3rd May, 2020. The existing lockdown measures have already brought seventy percent of our country’s economic activities, investments, exports etc. to a complete halt. The corona outbreak has attacked the Indian economy at the most inopportune time, when its economy was showing some signs of recovery after fiscal/monetary measures. Our country has entered into the whole situation of Covid-19 on a weaker footing, magnifying the pre-existing risks to its outlook.

Unfortunately, the impact of this corona virus on our county will be many a fold times, as India is an emerging economy and therefore, the future for our country seems bleak and unwelcoming. The extent of actual impact would depend on the severity and duration of the outbreak, which is still unknown. If the spread of Corona Virus is not curtailed in a timely manner, the day is not too far, when our business houses may require some ‘PPEs’ and our economy as a whole may require ‘Ventilator’.


 “Nationwide complete lockdown is likely to shave off at least 7-8 trillion”

– Centrum Institutional Research

Besides the impact on human lives, the pandemic is a severe demand shock, leading to a decrease in the optimism levels, severe disruption to global supply chain and steep fall in the consumption. This pandemic will definitely dent the vision of our Prime Minister of making India a Five Trillion Dollar Economy and a global powerhouse by 2024-25. Several well renowned credit rating business houses have already forecasted financial results of our country, which does not seem very promising. Dun & Bradstreet has revised its Gross Domestic Product (GDP) estimates for India downwards by 0.2 percentage points to 4.8% for the fiscal year 2020. Moody’s Investor Services has slashed the India’s growth to 2.5% from 5.3% for the year 2020. Goldman Sachs has cut India’s real GDP to 1.6% from 3.3% for the financial year 2020-21. The Apex Bank of India i.e. the RBI has refused to give the growth projections for our country, and this alone is an indicator of the upcoming famine in the Indian economy.  However, Shri Deepak Parekh, Chairman HDFC Limited, has projected the growth rate of India at 2% as against the pre-existing rate of 6%. Mr. Raghuram Rajan, Former RBI Governor quotes “Economically speaking, India is facing today its greatest emergency since Independence”. He further compared the situation with that of Recession of 2008 and said that the Global financial crisis in 2008-09 was a massive demand shock, but our workers could still go to work.

Another pandemic, in the form of Unemployment had already knocked the doors of our country way before the Corona pandemic. Before the outburst of corona, the rate of unemployment in our country was already at a 45 year high. The Centre for Monitoring Indian Economy has estimated that the overall unemployment rate has shot up from 8.4 % in mid-March to current 23%. Early estimates of jobs data indicate that the corona virus effect may leave a devastating impact on the economy, sending urban unemployment rate soaring to 30.9%. In India, nearly one-third of the workforce is made of casual workers, who might not have much of a safety net if the economic flux continues.

With every country across the globe grappling with economic problems, the world economy is almost on the verge of shrinking. However, according to some economic pundits, India may end up in a better position than other countries. Firstly, our country is less dependent on exports, so if globalization is put on reverse gear and new trade barriers are imposed, our country will not be affected as much as other countries. Secondly, our economy is a service based economy and not manufacturing based, some of which, for example: Information Technology, Banks, Online Services etc. are still working amidst the lockdown.  Thirdly, our country has enough foreign reserves and on a recurrent basis our country receives foreign funds from NRIs, which will help our country to reduce its currency risk. Lastly, the maximum imported community for our country is Crude Oil, the prices of which have already dropped by 50% to almost $25-$30 a Barrel and are not expected to shoot up in near future. Such plummeted oil prices will play a critical role in saving our economy from external shocks. Looking to the above cited positives, optimists expect a V-shaped economic recovery i.e. a sharp decline will be followed by a sharp recovery.


The potential impact of outbreak of Corona virus pandemic is not yet known, but several sectors are already feeling the pain. For the Agriculture sector, it is most unfortunate that the lock down has been announced at a time when the crops are ready to be harvested. The lack of labour, lack of transport mechanism, lack of access to markets etc. will cause a major setback to the agriculture sector. Indian Real Estate Sector, due to several challenges such as Demonetization, GST, RERA and Liquidity Crisis, was already in prolonged slow down and this Covid-19 crisis will serve it no better. With the emerging concept of ‘Work from Home’, commercial demand will evaporate to an extent. The pricing for properties will come down, and the property owners/developers will be ready to get rid of its ready inventory at the earliest, which will be an opportunity for the homebuyers. Automobiles Sector is already under an apprehension of facing a decline of 15%-16% for the year 2020. The sluggishness of Real Estate sector and Automobiles sector will directly affect the Iron & Steel manufacturing industries. The most worrisome impact of corona crisis is on the Banking & Financial Sector. With the global recession creeping in, the NPAs of the banks and financial institutions/NBFCs are expected to pile up. Also, the negative impact of crisis on industrial production and domestic demand are likely to aggravate the difficulties for Indian banks. Fitch Rating Agency has already revised down the operating environment score for this critical sector by a notch from “BB” from “BB+” earlier.

However, the three months moratorium scheme of the RBI will soften the negative credit impact. With the rising tensions & fear globally, there will be a demand slump in the Tourism Sector, as the travelers might be hesitant to even travel within the country. For Aviation Industry, the crisis took-off at a time when the airlines were already navigating through falling rupee turbulence and this lockdown has forced all of them to land on ground. The overall depression in the economy will burden the pockets of an individual, which will cause subdued demands, followed by production slowdown and consequently, impacting the supply chain distributions. As people becoming more cautious, Hospitality sector may face sharp declines in their businesses. However, with the online food chains delivering food at the door steps of customers, the restaurants and food chains may continue to survive. Social distancing may required to be followed even after this lockdown ends, so one can expect a decline in the businesses of Multiplexes, which will directly hit the pockets of the Film Industry. Apparels industries may face troubles due to people’s reluctance to visit showrooms and outlets. The consumer durables and electronics industries of our country are heavily dependent on China. With the supply chain disruption in China, the consumer durables sector of our country may face unprecedented troubles. With the ongoing turbulence in the stock markets, the retail investors will choose to keep their heads out of these markets.   Startups might face tough time in fetching investments and their valuation model may undergo change.


“Life in the time of Covid-19 has been one of unprecedented loss and isolation. Yet, it is worthwhile to remember that tough times never last; only tough people and tough institutions do.”

– Shaktikanta Das (RBI Governor)

From boosting banks’ liquidity to providing relief to their customers, RBI seems to have come out all guns blazing to tackle the economic disruptions caused by the novel corona virus outbreak, in the form of a ‘Financial Package’. The key take away from the financial package is all the Commercial Banks, Financial Institutions, NBFCs have been permitted to allow a moratorium of three months on payment of interest on working capital loans and installments in respect of all term loans outstanding as on March 1, 2020.  The RBI has also slashed the repo rate and reverse repo rate by 75 and 90 basis points to 4.40 & 4.00 percent, respectively. Further, a cut of 100 bps in the Cash Reserve Ratio (CRR) has been announced.

It has been expected that the measures taken will help inject total liquidity of Rs 3.74 lakh crores to the system.  Further, the RBI has also created a facility to help the State Government’s short term liquidity needs, and relaxed the export repatriation limits. The RBI has also asked financial institutions to assess the impact on their asset quality, liquidity, and other parameters due to spread of Covid-19 and take immediate contingency measures, including BCPs, to manage the risks following impact assessment. The Reserve Bank of India, on behalf of Government of India, has also come out with timelines for issuance of Sovereign Gold Bonds, having a tenor of eight years, which will be available until September, and will be sold through Banks and designated Post Offices. The RBI has shown its intent to battle the long-term effects of the crisis, along with the fresh relief measures, which is likely to lift moods of financial markets in coming days.

On the other hand, the World Bank has already approved USD 1 Billion to India, of which the first tranche has already been released to deal with the emergency in the health care sector. The World Bank is also working with India on additional operations, which includes employment, banking and MSME sector.


The first and the most important role of the Government is to ensure the safety of its citizens. The Government should ensure that proper sanitizations facilities be made available across the country. The Government should ensure that whenever this lockdown ends, a rebound programme is kept ready which should focus on temporary jobs, especially at the local levels, to tackle the menace of unemployment. The Government should reduce compliance burdens on business houses and give them the liberty to transact business at their maximum capacities. The Government should also focus on fast-track resolution of existing litigations and take as many steps to avoid legal battles. The Reserve Bank of India should provide ample liquidities to Banks, NBFCs and Financial Institutions. The RBI should implement measures to prevent bankruptcies especially of small and medium-sized industries. The RBI may even think of allowing one-time restructuring of loans, by renegotiating payment timelines rather than getting into legal tangle. The Securities and Exchange Board of India should also come up with a mechanism which would reduce compliance burdens on Body Corporates. Further, SEBI should encourage people to invest through Mutual Funds, as they are less risky.

The Business houses should ensure security of Life, Food & Stay for its employees and staff and should also follow social distancing norms at the maximum possible levels. The business houses should be inclined towards leveraging long-term relationships with suppliers & its customers. In the existing volatile state, the business houses should focus on enhancing equity cushions and improving their Debt Equity Ratio. Many experts suggest that the coming time is for working together and sharing the risks. The business houses should also focus on raising the bars for governance and transparency. Lastly, we, Chartered Accountants, have always been an integral part of nation building and amidst these glooms and dooms of our economy, we will be required to perform our roles & responsibilities towards the nation in a more efficient and diligent manner.

The economic health of our country may get worsened if the spread of the Corona Virus is not curtailed soon.  But, if a large scale domestic contagion scenario is avoided, early policy measures pay off, restrictions to the supply chain cycle gets lifted swiftly, we can expect our economy to take an U-turn. Every Global Crisis gives rise to a world leader. Great Depression/World Wars gave rise to US leadership, 2008 financial crisis made China an economic powerhouse and now, this 2020 crisis can be an opportunity for India’s leadership economically, politically and socially. As it is said ‘Yesterday is not ours to recover, but tomorrow is ours to win or loose’, we should keep our heads high and faces to the sunshine.


Author Bio

Qualification: CA in Practice
Location: INDORE, Madhya Pradesh, IN
Member Since: 16 Apr 2020 | Total Posts: 1

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  1. Pavithra says:

    Yes there is lot of problems people are sufferring from lockdown for example family members are not able to visit if a person dies but there is no other better solution right now so lets accept it as a solution and be optimistic and face the situation. One man problem is other man’s opportunity.
    Lets stop complaining and join our hands to the possible extent to serve each other.The joy of living is in giving lets help the people around us and motivate for the better tommorrow.

    Jai Jawan Jai kisan
    Jai Hind.

  2. LalitNyati says:

    “The lack of labour, lack of transport mechanism, lack of access to markets etc. will cause a major setback to the agriculture sector.”
    It’s not true..please take right information at ground level…

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