Impact of Covid-19 on Indian Economy

Impact of Covid-19 on Indian Economy

1. Department of Agricultural Economics University of Agricultural Sciences-Bengaluru SEMINAR-1 IMPACT OF COVID-19 ON INDIAN ECONOMY Seminar Teachers: Dr. G.M Gaddi Dr. Mahin Sharif Chairman: Dr. Sreenivasa Murthy. D ICAR-IIHR-Bengaluru Presented by: Harish Kumar H.R II Ph.D (Agricultural Economics) UAS-GKVK-Bengaluru

2. Flow of Presentation 2

3. INTRODUCTION Coronavirus disease 2019  ( COVID-19 ) is a contagious  disease  caused by severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2). The first case was identified in Wuhan, China, in December 2019. (In India 30 January 2020) Symptoms of Covid-19 are variable, but often include fever, cough, fatigue, breathing difficulties, and loss of smell and taste. By mid-May 2020, six cities accounted for around half of all reported cases in the country Mumbai, Delhi, Ahmedabad, Chennai, Pune and Kolkat a On 10 June, India's recoveries exceeded active cases for the first time. Infection rates started to drop significantly in September, and the number of daily new cases and active cases started to decline rapidly. India has over 30 anti-COVID vaccines in various stages of development and a national vaccination drive was started on 16 January 2021. India began the world's largest Covid vaccination drive on January 16 and in 18 days the country has successfully vaccinated over 4.1 million healthcare workers. 3

4. Covid-19 Situation in India 4

5. Effect of Covid-19 Loss of Human Lives Affects Mental Health Increases the fear of death (Rumors, quarantine) Leads to Imposition on Nation wide Lockdown Phase 1 (25 march-14 April) Unlock 1.0 (1-30 June) Phase 2 (15 April-3 May) Unlock 2.0 (1-31 July) Phase 3 (4-17 May) Unlock 3.0 (1-31 August) Phase 4 (18-31 May) Unlock 4.0 (1-30 September) Unlock 5.0 (1-31 October) Unlock 6.0 (1-30 November ) Disruptive in Economic activates Job loss Decreased the household income 5

6. Twin Economic Shocks by the Pandemic The pandemic has been a unique economic shock that has triggered both supply and demand side shocks which increased uncertainty, lower confidence, loss of incomes, weaker growth prospects, fear of contagion, curtailment of spending options due to closure of all contact-sensitive activities, the triggering of precautionary savings, risk aversion among businesses and resultant fall in consumption and investment – leading to the demand shock. The supply chain disruptions caused by closure of economic activity and restricted movement of labour lead to the first order supply shocks. The initial supply shock, resulting in wage and income loss, could impact aggregate demand and impair productive capacity leading to supply shocks 6

7. Sector wise GDP in India (2019-20) Sector GVA in 2019-20 (Rupees in Crore) Share (%) Agriculture Sector 3,257,443 17.76 Agriculture and allied sectors 3,257,443 17.76 Industrial sector 5,040,100 27.48 Mining & quarrying 393,102 2.14 Manufacturing 2,775,587 15.13 Electricity, gas, water supply & other utility services 486,516 2.65 Construction 1,384,895 7.55 Services Sector 10,045,694 54.77 Trade, hotels, transport, communication and services related to broadcasting 3,316,653 18.08 Financial, real estate & prof services 3,842,524 20.95 Public Administration, defense and other services 2,886,517 15.74 Total 18,343,237 100 Source: Ministry of Statistics and Programme Implementation GVA (Gross Value Added): GVA is the measure of the value of goods and services produced in an area, industry or sector of an economy (GVA= GDP+ Subsidies on products-Taxes on products) 7

8. Effect of Covid-19 on Agriculture sector 8

9. Given the expectation of a bountiful kharif harvest, the food grain production target has been set at 301 million tonnes for the 2020-21 crop year, up by 1.5 per cent from the record output achieved in 2019-20 This indicates that agricultural activities for rabi harvesting and kharif sowing were largely unaffected by the covid - 19induced lockdown. Source: Ministry of Agriculture, Department of Food and Public Distribution Note: Production figures for 2020-21 are estimates Effect on Agriculture Production 9 For the year 2020-21, Horticulture production is estimated to 303 million tonnes . However, it was 285 and 297 million tonnes for 2018 and 2019 respectively.

10. 2.2 lakh farmers 400 crore broilers 9,300 crore eggs Growth 6-8 per cent per annum Rumours and fears Price crash liquidating the stocks at lowest ( Rs.20 or free at the end of march 2020 ) Hatching costs Rs. 18-19/ piece Pre- COVID: Rs. 20-25 / piece Post- COVID: Rs. 5-7 / piece 37 per cent maize price low Rs. 1,700 to 1,100 per quintal loss of ₹100-130 on every bird End of May chicken prices rises i,e Rs. 240/kg (dressed) & Rs. 170/ Kg (live bird) Effect of on Poultry Sector Source: www.indexmundi.com Rs/Kg 10

11. Largest producer of milk in the world (508 lakh liter / day)  16.90 million farmers ( 70% Small farmers) 1,90,500 village dairy cooperatives 245 milk unions and 22 federations IMPACT 30% Demand Dip for fresh milk Fallen procurement rates (Rs. 31 to 27) Disruption in supply chain Ice cream: fear of infection (dip 50-60% turnover) MEASURES Buying extra milk just to help –farmers (KMF: 7-8 lakh liter / day) New ways to reach their customers Doubled- skimmed milk powder 80% rise in demand (gee, paneer etc.,) Effect on Dairy Sector Source: www.financiaexpress.com April 26 2020 11

12. India is the second largest fish producing country in the world and accounts for 7.58 per cent of the global production The fish production in India has reached an all-time high of 14.16 million metric tons during 2019-20. The fisheries sector contributes 1.24 per cent to the GVA and 7.28 per cent to the agricultural GVA The export of marine products stood at 12.9 lakh metric tons with a value of ` 46,662 crores during 2019-20 The livelihood opportunities provided by this sector have been instrumental in sustaining incomes of over 28 million people in India Harvest and post harvest  supply chain system has been affected Slump in demand in major export countries (US, Europe and China etc.,) Rise in demand for dry fish but difficulty in sourcing the raw material Monthly loss of US $896-million (ICAR-CIFT) Lack of workers (migrant from east cost) Domestic market are unorganised Effect on Fisheries sector 12

13. Source: Economic Survey 2020-21 Agriculture and Allied sectors In 2020-21, the growth rate is estimated to be 3.4 per cent. Contribution of the sector to Gross Value Added (GVA) declined from 18.3% to 17.8% between 2014-15 and 2019-20 It is estimated to Increase 19.9% in 2020-21 Agriculture is set to cushion the shock of the COVID-19 pandemic on the Indian economy in 2020-21. 13

14. Growth of GVA of Economy and Agriculture &Allied sectors The growth in GVA of agriculture and allied sectors has been fluctuating over time. However, during 2020-21, while the GVA for the entire economy contracted by 7.2 per cent, growth in GVA for agriculture maintained a positive growth of 3.4 per cent. Source: Economic Survey 2020-21 14

15. Effect of Covid-19 on Industry Sector 15

16. Year Natural gas Cement Crude oil Refinery products Steel Fertilizer Electricity Coal Overall 2019-20 -3.1 0.01 -5.9 -1.1 6.7 4.0 0.8 -5.4 0.3 2020-21 -12.1 -19.5 -6.0 -14.9 -19.4 3.8 -4.7 -2.6 -11.4 Eight Core Index: The monthly Index of Eight Core Industries is a production volume Index. It measures collective and individual performance of production in selected eight core industries. It was released by ministry of commerce and industries. It comprise 40.27 per cent of the weight of items included in the index of Industrial production (IIP) Index of Industrial production (IIP) is an index for India which details out the growth of various sectors in an economy such as mining, electricity and manufacturing It is compiled and published monthly by the National Statistics Office (NSO), Ministry of Statistics and Programme Implementation. IIP and Eight Core growth from Jan-2019 to Nav-2020 (Per cent) 16

17. Mining: 29 minerals are tracked here. (Weight= 14.4 %) Manufacturing: 809 items are tracked in this sector. (Weight= 77.6 %) Electricity : Total electricity generated in country is tracked here. (Weight= 8 %) Growth of different components of IIP from Jan 2020 to Nov 2020 (Per cent) Source: Ministry of Statistics and programme implementation 17

18. Share of Industry and its components to GVA (Per Cent) * Electricity, gas, water supply and utility services Source: Ministry of statistics and programme Implementation Overall, industrial sectors contributes to 25.8 per cent to India’s GVA. 18

19. FDI Equity flow to Manufacturing and Non-Manufacturing sector Source: Department for promotion of Industry and Internal Trade FDI is a one of the major sources of investment and investment financing that drives the economic growth in the country. The FDI flows are also associated with the enhancement of productivity, skills and technology development in the country. The proactive policy measures and improvement in the ease of doing business in the country resulted in massive improvement in FDI inflows. (63 rd rank in World Bank’s Ease of doing Business in 2019) During FY20 (2019-20), total FDI equity inflows were US$49.98 billion as compared to US$44.37 billion during FY19 (2018-19). The similar number for FY21 (up to September-2020) was US$30.0 billion. The bulk of FDI equity flow is in the non-manufacturing sector leading to a reduction in the share of manufacturing in the FDI flows Within the manufacturing sector, industries like automobile, telecommunication, metallurgical, non-conventional energy, chemical (other than fertilizers),food processing, and petroleum & natural gas get the bulk of FDI equity flows. These industries together accounted for about 67 per cent of FDI equity flows into the manufacturing sector in FY20 (2019-20) 19

20. Source: Economic Survey 2020-21 Note: Q1 and Q2 The Industrial sector is estimated to decline by 9.6 per cent in 2020-21. Within the sector highest decline is estimated in construction (12.6%) and mining (12.4%) The contribution of the Industrial sector to the GVA (Gross Value Added) is declined from 32.50 per cent in 2011-12 to 25.80 per cent in 2020-21 Effect of Covid-19 on Industrial sector 20

21. Effect of Covid-19 on Service sector 21

22. Growth in Rail Freight Traffic R ail freight traffic growth nosedived to (-) 35.3 per cent YoY in April 2020 rising back sharply to 15.5 per cent in September 2020, The growth momentum has continued till December 2020. Indian Railways loading was 118.13 million tonnes in December 2020, which is 8.54 per cent higher compared to last year’s loading (108.84 million tonnes ) for the same period. Indian Railways has so far incurred 87% loss in passenger revenue, down from ₹53,000 crore last year to just ₹4,600 crore, owing to the COVID-19 pandemic. Indian Railways is among the world's largest rail network R oute length network is spread over 1,23,236 kms, with 13,523 passenger trains and 9,146 freight trains. Plying  23 million   travellers and  3 million   tonnes (MT) of freight daily from  7,349  stations 22

23. Growth in Air Passenger Traffic According to Directorate General of Civil Aviation (DGCA), 63.54 lakh domestic passengers travelled by air in November, which was 20.54 per cent higher than the passenger traffic in October when 52.71 lakh passengers flew. The domestic air traffic, however, stands 50.93 per cent lower in November howeverer 2020 as compared to November 2019, wherein 1.3 crore passengers had flown. wherein 1.3 crore passengers had flown. 23

24. Growth in Foregin Tourist arraivals to India Growth in Tourism Foregin Exchange Earning Source: Ministry of tourism I nternational arrivals fell by 72 per cent globally over the first ten months of 2020 India ranked 23rd in the world in terms of international tourist arrivals in 2019 The country accounts for 1.23 per cent of world’s international tourist arrivals and 4.97 per cent of Asia & Pacific’s international tourist arrivals India ranks 12th in the world and 7th in Asia & Pacific in terms of tourism foreign exchange earnings (2 % of world tourism FEE) 24

25. Commodity group Share (Per cent ) Growth (Per cent) Year over Year (YoY) 2019-20 2018-19 2019-20 2020-21 (April- september ) Total Services Exports 100 6.60 2.50 -7.89 Travel 14.10 0.30 5.50 -73.49 Transportation 9.80 11.60 7.80 -2.34 Insurence 1.10 6.20 -8.70 -2.99 Software services 43.70 7.90 11.50 3.55 Business Services 18.80 4.70 16.90 2.48 Financial Services 2.30 -5.90 -2.60 -20.35 Communication 1.20 22.10 6.30 2.44 Total Services Import 100 7.30 1.80 -13.95 Travel 17.20 11.20 1.40 -55.09 Transportation 18.90 16.60 18.30 -25.90 Insurence 1.40 5.30 -2.90 -5.80 Software services 6.60 13.10 45.50 15.60 Business Services 36.50 10.30 16.00 4.22 Financial Services 2.30 -37.00 -16.30 94.80 Communication 1.00 18.40 14.70 3.24 Service trade performance by Sub-Sectors S ignificant drop in foreign tourist arrivals owing to the mobility restrictions imposed worldwide. Slowdown in trade activity and supply chain disruptions led to the decline in transportation recepits . majority of software companies which had reported negative revenue growth in Q1 of FY2020-21, have shown signs of rebound in Q2 with positive sequential growth. Source: https://www.rbi.org.in/scripts/AnnualReportPublications.aspx?Id=30 25

26. The service sector accounts for (53.66%) of India’s GVA of Rs. 137.51 Lakh crore. (In 2019) Service sector is estimated to contract by -8.8 % (With trade and hospitality contracting the most (21.4%)) Software services was the only sub sector with positive growth in the period of April-September (2020) Effect of Covid-19 on service sector Source: Economic Survey 2020-21 26

27. STATES MGNRGA work demand in March2020 Rural job demand in May 2020 Per cent raise in demand Bihar 12,44,491 16,94,496 26.55 Chhattisgarh 22,99,126 42,20,136 45.52 Andhra Pradesh 42,67,455 66,28,938 35.62 Gujrath 2,71,296 4,54,658 40.38 Madhya Pradesh 14,77,337 33,71,539 56.18 Maharashtra 7,13,164 12,27,708 41.91 Uttar Pradesh 17,40,211 49,34,269 64.73 Rajasthan 22,06,063 43,32,526 49.08 Other states/UTs 12,60,48,623 198284653 36.43 Total 153412893 253013193 40.82 Source: nrega.nic.in 2020-21 Demand for Jobs under MGNREGA Effect on Employment 27

28. Inflation Situation in India Dec-2016- Dec 2020 28

29. 29 23, march, 2020= 25,981 (-13.15%) 12, March, 2020=32778 (8.18%) Company Share price on 23march 2020 (Rs.) Share price on 16 march 2021 (Rs.) Percentage increased Reliance 875.72 2100.75 139 SBI 181.60 378.90 108.64 GAIL 78 143.35 83.78 SAIL 22.95 74.85 226.14 Tata steel 271.15 724 167 Tata Motors 66.20 319 381.87 JSW 144.40 427.15 195.81 Jindal steel and power ltd 89 322.20 262.02 Effect of Covid-19 on Indian stock market

30. Projection of Real GDP for 2020-21 Source: Economic Survey 2020-21 Note: India’s Real GDP growth (2020) for Q1 and Q2 and Q3 is -23.9%, -7.5 % and 0.4% respectively. 30

31. 31 Measures taken to overcome for recession

32. ONSET OF PANDEMIC: India’s policies focused purely on ensuring necessities 80 Crore given free food; emergency credit and liquidity measures, forbearance Optimal- given the uncertainty and the resultant precautionary motives to save as well as the economic restrictions during the lockdown UNLOCK PHASE : Calibrated demand side measures announced Atma Nirbhar 2.0 and 3.0 announced enhanced capital expenditure, wage subsidies, PLI Schemes Demand side Policies Source: Ministry of statistics and programme Implementation Policies taken by Government for Economic Recovery 32

33. Supply side Policies Disruption in the labour markets and financial distress of firms could lead to loss of production capacity. A slew of structural reforms announced to enhance supply in the medium-to-long run => avoid loss of productive capacity Reforms primarily focus on Strengthening the potential of primary and secondary sector To create jobs and thereby enable aggregate demand Streamlining of Labour Laws Broad based Reforms in Agriculture, MSMEs, Services (BPO), Power, Mineral sector, Space, Defence. Strategic PSUs Policy 33

34. Fiscal stimulus by Government of India In order to facilitate a resilient recovery of the economy from the impact of COVID-19 pandemic and the following lockdown Government of India and RBI together announced a total stimulus worth Rs. 29.87 lakh crore, which is 15% of national GDP. Out of this, stimulus worth 9% of GDP has been provided by the Government under Atma Nirbhar Bharat Package This stimulus was provided in the following tranches: a. Special economic and comprehensive package, announced from 13-17 May 2020. b. Measures to stimulate consumer spending in the economy announced on 12 October 2020. c. Measures under Atma Nirbhar Bharat 3.0 announced on 12 November 2020. Major Announcements for Agriculture and Food Management under the Atma Nirbhar Bharat Abhiyan Rs. 1 lakh crores Agri Infrastructure Fund Rs. 10,000 crores scheme for Formalisation of Micro Food Enterprises (MFE) Rs. 20,000 crores for fisherman through Pradhan Mantri Matsya Sampada Yojana (PMMSY) Animal Husbandry Infrastructure Development Fund - ` 15,000 Crores From ‘TOP’ to TOTAL PM Garib Kalyan Ann Yojana One Nation One Ration Card Scheme 34

35. Mix of Stimulus measures announced in response to Covid-19 35

36. Note: Red colour indicates negative YoY and QoQ growth Brown colour indicates positive YoY or QoQ growth Green colour indicates positive YoY and QoQ growth. For indicators like CPI and G-Sec yield decline is considered as positive, i.e., green and vice versa Movement of High Frequency Indicators (V Shaped Economic Recovery ) Source: Ministry of statistics and programme Implementation 36

37. Trends in GST collection during 2020-21 Source: Department of Revenue 37

38. Medical Epi Curves V/S Economic Recession curves Source: Adapted from Gourinchas , P-O (2020) 38

39. 39 Case Study-1 Impact of covid-19 on Indian Agriculture System: A 10-point strategy for post-pandemic recovery Adeeth Cariappa, A.G., KAMALESH KUMAR ACHARYA., CHAITANYA ASHOK ADHAV., SENDHIL, A AND RAMASUNDARAM, P. 2021 Methodology Data type: Primary data Study area: India Statistical tools: Descriptive statistics Objective: Impact of covid-19 on the Indian agriculture system: Production, marketing and consumption

40. 40 Results Agriculture system Category Effect Production (n=225) High growth (Tamil Nadu, Punjab, Haryana, Uttar pradesh ) Shortage of labour in Punjab, Haryana and Tamil nadu (100%) Reverse migration in Uttar Pradesh Fear of infection to perform farm operations Low growth ( Maharastra , Karnataka Odisha, puducherry ) Disruption to input supply (100%) Reverse migration in Maharashtra Fear o f infection to perform farm operation Marketing (n=225) Persishables Logistic disruption (100%) Classical lossednd throwaway prices Distress sale in Odisha Limited sale points Semi/non-perishables Logistric disruption(100%) Relatively less loss in comparision to perishables Restricted movement Consumption Red (n=322) 45.7% has no access to market 72.7% perceived increase in food prices 91% changed their shopping behaviour 38.6% experienced income shocks 78.8% changed their consumption baskets Orange (n=276) 51.7% has no access to market 79.4% perceived increase in food prices 94.2% changed their shopping behaviour 47.1% experienced income shocks 78.3% changed their consumption baskets Green (n=131) 33.7% has no access to market 73.3% perceived increase in food prices 90.8% changed their shopping behaviour 41.2% experieced income shocks 77.9% changed their consumption baskets A pan-India online survey conducted via google form across three regions (post-stratification) as per the intensity of COVID-19 incidence viz. , red, orange and green. Red indicates the high rate of COVID-19 incidence, Orange indicates the moderate rate of COVID-19 incidence and Green represents the low rate of COVID-19 incidence or no incidence (classification as per the Government of India).

41. 41 Case Study-2 Income and Employment changes under Covid-19 lockdown: A study of Urban Punjab INDERVIR SINGH., JAGDEEP SINGH AND ASHAPURNA BARUAH., 2021 Methodology Data Type: Primary data Study area: Mansa city in Punjab state Statistical tools: Gini coefficient and Descriptive statistics Sample size: 55 households Objective: To Analyze the coping strategies of people in response to fall in their income

42. 42 Results Demographic Features of the Surveyed Household Percentage of workers who could not work during the Lockdown

43. 43 Average per day income of the workers during the lockdown Percentage fall in average per day income of the workers during the lockdown Results

44. 44 Results Status of savings before the Lockdown and after phase IV Borrowings of the households due to loss of income during lockdown

45. CONCLUSION 45 The risk of a global recession due to COVID-19 in 2020 and 2021 would be extremely high, as it has been observed globally that the shutdown of all economic activities—production, consumption and trade-to control the spread of COVID-19 is imminent. The nature of shutdown is unique in case of COVID-19 due to a supply shock, a demand shock and a market shock. The recovery in economy depends on the timings and magnitude of government support as well as the level of corporate debt and how the companies and markets cope with lower demand. Government assistance to those most in need (largely constituted of unorganised sector, migrants and marginalised communities) is a critical measure to save many lives. However, every crisis brings about a unique opportunity to rethink on the path undertaken for the development of a human being, community and society. The COVID-19 pandemic has a clear message for the Indian economy to adopt sustainable developmental models, which are based on self-reliance, inclusive frameworks and are environment friendly.

46. THANK YOU 46

47. 47 In fiscal year 2020, the ratio of  India's  total  exports  and imports of goods to the  GDP  stood at 27.8 percent, down from about 31.5 percent in fiscal year 2019. About half of the country's  GDP  was generated by the services sector during that time period.