Faced with unprecedented challenges ushered by the pandemic, several countries are seen in the balancing act of protecting lives and kickstarting economic activities. India, on the other hand, is navigating this multifaceted voyage with a mission to create a self resilient economy through agility, adaptability, and tenacity.
The exponential spreading rate of the virus not only impacted businesses but also heightened economic uncertainty, leading to a dip in consumption and investment among consumers, investors and international trade partners. Fast forward to Q1, FY20, the global macroeconomic outlook still continues to paint a grim picture, even as nations ease up lockdown norms and resume economic activities.
As per the International Monetary Fund (IMF), the projected global growth in 2020 is expected to fall -3%. This indicates a sharp fall of 6.3% from January 2020 – a significant revision over a very short period, implying that the Great Lockdown is going to be the worst recession since the Great Depression, and way worse than the Global Financial Crisis. What makes the situation grave is the fact that the pandemic outbreak will wipe out 6.7% of working hours in the 2nd quarter of 2020 – a staggering fact revealing the narrowing gap between economic activity and unemployment rate.
Also Read: Decoding Past Pandemics & Their Economic Impacts
The Mounting Pressure On The Economy
The pandemic outbreak is a significant shock to economies all around the world, as even major countries are reeling under the mounting pressure of the crisis. On home ground, the pandemic’s impact has triggered panic, as the four components of the economy – consumption, manufacturing, exports, and capital flows get hampered due to the lockdown and the consequent financial crisis.
- Consumption: Due to the demand shock triggered by lockdown and social distancing norms
- Manufacturing: Hit by massive scale supply chain disruptions
- Exports: Stalled due to lockdown and low consumer demand
- Capital Flows: Pandemic caused risk aversion due to which markets have felt the impact of capital outflows or slowdowns in capital inflows
According to the World Bank, the pandemic crisis has gravely disrupted the economic outlook of India and is expected to slow down to 5% in 2020, magnifying the pre-existing risks to its outlook. The recovery of the economy will be slow – it will take approximately 2 years for normalcy to come back. Considering the current situation, the economy is expected to function below potential as the pandemic’s long-term impact has just set in. For instance, the consumption level is likely to stay depressed from voluntary restraints, drop in income, and increase in the unemployment rate.
Also Read: India – The Next Supply Chain Hub Post COVID-19
How India Plans To Turn Disruption Into Opportunity To Create A Self-resilient Economy?
The coronavirus outbreak has compelled nations to look at localising their production and supply chains to curb the impact of the crisis. The pandemic outbreak and the ensuing economic downturn has presented India with the opportunity to lead in the evolving regional and global strategies for recovery. The very need for diversifying the supply chain has presented a golden opportunity for India to become self resilient and emerge as the next supply chain hub. The attractions of investing in India are apparent. For instance, as per industry experts, the entry-level payroll in India ranges between Rs 12,000 and Rs 15,000, whereas in China the salaries are about three times higher. India additionally has Special economic zones (SEZs) that allow special concession and business-friendly guidelines and arrangements.
With a $266 billion fiscal stimulus amounting to almost 10% of the Indian GDP, along with the Reserve Bank of India’s strategic moves to ease the economic pressure, the Indian government is not holding back on big spending. The country’s quest to become self-reliant or Atma Nirbhar comes in the backdrop of placing India as the next global nerve centre of the modern supply chains. By ramping up the efficiency across sectors and ensuring the quality of goods, India’s endeavour of self-reliance is expected to place India as the next supply chain hub, provide a boost, a massive jump to the economic potential of the nation by strengthening infrastructure, using modern technologies, enriching human resource, and creating robust supply chains.
The Atmanirbhar Bharat Abhiyan, as it is called, is a strategy to harness the growth forces across various sectors of the economy. It’s a launchpad for cultivating business, supporting advancement, and formation of an ecosystem for holistic growth. The plan of Atma Nirbhar Bharat Abiyaan comes with a slogan ‘tough times require tough decisions’. That being said, the whole idea of building up a self-resilient country would lay on the five mainstays of the Indian Economy – Infrastructure, System, Demography, and Demand. However, a significant challenge holding back manufacturing is a lack of flexibility in labour laws, high costs, and availability of land and high cost of electricity. While the overall economy might take a blow due to the lockdown, some sectors like FMCG, B2C lenders, edutech, and pharmaceutical will experience growth in the post-COVID era.
The pandemic outbreak is expected to turn the focus on India’s burgeoning market. Heading ahead, the top-most priority of the nation will be to strengthen the economy, build a robust supply chain, and set the country back on its growth track. As India looks at opening up after four phases of lockdown, it is aiming to explore opportunities for spurring comprehensive growth to identify new value chains and generate wealth. The nation will require to create strong enterprises that can translate into global forces while fortifying the nation’s employment rate. India’s quest for the Atma Nirbhar Bharat mission renders a possibility of strengthening manufacturing and reducing imports. To succeed in this mission, the nation needs to focus on the critical bottlenecks that are impeding growth and foster innovation.