IMPACT OF COVID 19 ON INDIAN ECONOMY

22^nd MARCH 2020

This blog is first in a series sharing the impact on Indian economy due to COVID 19 in terms of microeconomics.

Prepared By
Kartik Upadhyay

                                                                   INTRODUCTION

COVID 19

An Infectious disease arises from WUHAN a city in CHINA. It continues to make headlines from the world, an alarming number of cases have been reported from ITALY and IRAN. It has become a terror factor today thousands of people died and we never know how much more to go. Through COVID 19 the GLOBAL ECONOMIC IMPACT is unfavorable. The individual's worlds are getting constrained inside the wall of their home. The work and business all are at a halt. The effect in the long run, not a matter of surety but, if things remain just like that then there's a big downfall ahead.

INDIAN ECONOMY

To understand the basic concept of an Indian economy. We need to know about the meaning of the economy. So, In basic term, an economy can be defined as "A system in which goods and service are produced which generate income for the country and individuals''

There are two types of the economy -

a) PLANNED ECONOMY- An economy where country resources are controlled and distributed among the various sectors by the government.

b) MARKET ECONOMY- An economy where all the production units and resources are controlled and distributed among the various sector by the individuals.

So, INDIAN ECONOMIC SYSTEM refers to an arrangement by which central problems of an economy are solved.

CENTRAL PROBLEM OF AN INDIAN ECONOMY REGARDING COVID 19

Generally, there are three central problems of an economy-

a) WHAT TO PRODUCE?

b) HOW TO PRODUCE?

c) BY WHOM TO PRODUCE?

So, In terms of COVID 19, the central problem of an economy should be evaluated as follows-

a) WHAT TO PRODUCE- It is a situation when the country decides which type of goods and services and at what quantity should be produced according to the need of the people living in a country.

So, as we observed there is a critical situation in the world, there is so much shortage of hand Sanitizer, protection masks, medicines, and food items regarding it. So, in my opinion, these products should be the main part of the production unit of the country's economy nowadays.

b) HOW TO PRODUCE- It is a situation related to the choice of technique, the country decides which type of technology is better for the production of goods and services. The high populated country uses labor techniques to increase employment and low populated countries use capital intensive techniques. Hence we need to switch to automatic machinery for production.

c) BY WHOM TO PRODUCE- It is related to the problem of distribution of income. The country people income varies from each other some people are rich and some are very poor. So, the basic motive of this production is that each individual of the country can afford these products for safety and precautions from COVID 19.

ILL EFFECTS ON ECONOMY

The economy, under the circumstances, is definitely to be effected. From confectionary to the MNCs, the entire world economy is facing a downfall. The situation today and the once heading towards us, surely reminds us of the great depression of the 1920s. The airlines are getting into debts, tourism, and hotel management freeze, shopping mall, and brand stores all are shut down. The virus is affecting the entire economy from primary to tertiary levels. Production, extraction and all the means of tertiary business, all at a halt. The share market is sinking deep as well. Marketers are withdrawing their shares. (OMG, seems like a description of the great depression)

The condition today is causing a drastic fall in the speed of the entire world. Prices of electronics are going up and 3% excise duty raised on petrol and diesel in INDIA (whereas prices outside India are being relaxed).

The government of different nations faces a decline in their reserves. The whole world is at downfall hoping for the warm rays to slow the effect of the virus.

The price of electronics is decreased in e-commerce because of less demand and terror of coronavirus in people that's why companies are forced to sell these products at minimum cost. Japanese AC company DAIKIN is going to increase its price by 3-5% in the upcoming time as it already informed retailers around the world so that it can recover from the loss company is facing right now due to the outbreak of coronavirus. Because of COVID-19, there is a huge decrease in the import and export result of which the cotton and textile industry is also facing a huge loss because of the decrease in the demand of cotton in the Chinese market result in which there decrease of about 200-300 rupees in these products.

IMPACT ON DEMAND CURVE

The demand curve is a graphical representation of the relationship between the price of a good or service and a quantity demanded for a given period.

COVID 19 is enhancing day by day, so the impact of it in the demand curve is in two ways-

a) Increase in demand

when the COVID 19 makes many countries to lockdown. As the demand for hand sanitizers, protection masks, medicine, and food items is increasing gradually. The effect on the demand curve will be-

b) Decrease in demand

As COVID 19 arises from CHINA, the Indian market situation is in bad condition. All the Chinese product which are exported to INDIA gets demolished and have less demand in the market. The price of the product is cheap also but the Indian consumer gets terrified of the product as it is coming from CHINA. So, the demand for the product decreases. The effect on the demand curve will be-

IMPACT ON SUPPLY CURVE

The supply curve is a graphical representation of the correlation between the cost of the good or service and a quantity supplied for a given period. As COVID 19 is spreading it also affected the supply curve of the Indian market. The impact of it in the curve are as follows-

a)      Increase in supply- There is a shortage of Chinese products in the market. So, there is no increment in the market. The supply of the Chinese product doesn't increase.

Hence, it remains constant.

b) Decrease in supply- As the product is scarce in the Indian market. The situation is very bad and as there is a lockdown in the market. So, the supply of the product decreases. The impact of it on the supply curve would be-

IMPACT ON IMPORT AND EXPORT

So, according to COVID 19 whose effect is disturbing the whole world.

It also affected the condition of Import and Export of a country.

The word import is generally defined as 'A process of bringing goods to a country from abroad for sale or the use of the country'. Similarly, the word export is generally defined as 'A process of sending goods to another country from home country for sale'. Both are interrelated to each other. It should be done in balance. In simple language, an import from the receiving country is an export from the sending country.

Its impact on modern scenario after the interruption of COVID 19 has affected so much. It got affected in several ways-

a) According to the survey of Economic Times, India had restricted exports of certain APIs (Active Pharmaceutical Ingredients) and formulations in the wake of the coronavirus pandemic. The pharma sector is keen to resume export.

b) The government had restricted the import of Paracetamol and several vitamins (B1, B6, B12) on the ongoing COVID 19 pandemic.

c) It affected the automotive industry also, the electronic parts come from China to the electronic maker in the Indian market had predicted to raise the price by 3-5% due to shortage.

d) Mobile phones, TV and other electronic items of China has a shortage in the Indian market and the consumer is also terrified of the Chinese product.

IMPORTANT FACTS

According to the WORLD ECONOMIC FORUM, INDIA's economy through the impact of COVID 19 are as follows-

a) As estimated today on 22nd March 2020, 368 cases of COVID 19 are registered from INDIA

b) INDIA is in phase 2 of COVID 19, though which government is taking several actions to stop this.

c) If the situation remains the same, the growth rate would come to 3% which is not good at all.

d) It is affecting all the cities to lockdown, which is the worst effect of the Indian economy as money flow decreases.

e) If it remains the same then the Industrial growth rate comes to negative.

f) As we know about the weather condition, previously it is affecting the rural economy and now after COVID 19, it will create the worst effect.

g) The daily wage people or unskilled workers would face bad conditions to earn their livelihood.

h) The wage rate and consumption would also be decreases.

i) Aggregate demand also gets affected by this as there are no transfer payments.

j) Government taking preventive measures like advertisement and steps to be safe from COVID 19.

 CONCLUSION

As we observed that COVID 19 is a real threat to the Indian Economy. In my opinion, India should allow transfer payments which don't affect the aggregate demand. Through which purchasing power is also maintained. The last but not the least, the tax collection should stop increase the faith. Like the CANADA government which are taking these measurements.

 Not only such measures we should also take preventive actions to fight with it. Stay safe and follow the rules of the government.

                                  #STAY AT HOME   #SAVE THE LIVES