Answer to Question #170053 in Microeconomics for Chhavi Nagar

Question

In the current pandemic-related GDP growth slowdown across the world, which industries or sectors in the Indian economy do you consider to have most benefited from the Covid-19 crisis and why? Explain and highlight in detail using the Demand-Supply analysis to substantiate your argument Justify your analysis by supporting it with facts-cum-online data and substantiate your argument by extensively using graphs to highlight your answer .

Answer 1

According to the Nomura India Business Resume Index, economic activity fell from 82.9 on March 22 to 44.7 on April 26. By September 13, 2020, economic activity was almost back to the level that preceded the lockdown. Unemployment rose from 6.7% on March 15 to 26% on April 19 and then returned to pre-lock levels by mid-June. During the isolation, some 14 million people (140 million) lost their jobs, while the salaries of many others were cut. More than 45% of households across the country reported a decrease in income compared to the previous year. The Indian economy is expected to lose over ₹ 32,000 rupees (the US $ 4.5 billion) every day during the first 21-days of the full Lockdown, which was announced following the coronavirus outbreak. In total isolation, less than a quarter of India's $ 2.8 trillion economic movements operated. It is predicted that up to 53% of enterprises in the country will be significantly affected. Supply chains are under stress due to imposed restrictions; Initially, there was a lack of clarity in the definition of what is “essential” and what is not. Workers in the informal sector and in the daily wage group are at the greatest risk. A large number of perishable farmers across the country also faced uncertainty.

Major companies in India such as Larsen & Toubro, Bharat Forge, UltraTech Cement, Grasim Industries, Aditya Birla Group, BHEL, and Tata Motors have temporarily suspended or significantly reduced operations. Young startups have been affected by funding cuts. The country's fast-growing consumer goods companies have significantly scaled back operations and focused on the bare essentials. Indian stock markets posted their worst losses on record on March 23, 2020. However, on March 25, the day after the prime minister announced a complete 21-day lockdown, SENSEX, and NIFTY posted their biggest gains in 11 years. Indices: S&P BSE 500 (January 2015 to November 2020). The blue backlight reflects the COVID-19 period (starting in March 2020 according to the first isolation). The Indian government has announced a series of measures to combat the situation, from food security and additional funds to health care and for states, sector-related incentives, and an extension of the tax period. On March 26, a series of economic relief measures for the poor were announced totaling over ₹ 170,000 rupees (the US $ 24 billion). The next day, the Reserve Bank of India also announced a series of measures that would make available ₹ 374,000 rupees (the US $ 52 billion) in the country's financial system. The World Bank and the Asian Development Bank have approved support for India in the fight against the coronavirus pandemic. The different phases of India's isolation prior to the "first unlock" on June 1 had different degrees of economic opening. On April 17, RBI Governor announced additional measures to counter the economic impact of the pandemic, including special funding of Rs.50,000 (the US $ 7.0 billion) for NABARD, SIDBI, and NHB. On April 18, in order to protect Indian companies during the pandemic, the government changed India's foreign direct investment policy. Department of Military Affairs on withholding all capital acquisitions at the beginning of the fiscal year. The chief of defense staff said India should minimize high-priced defense imports and enable domestic production; also be sure not to "misrepresent the operational requirements."