The Indian government announced it will terminate the countrywide lockdown after 14th April 2020 which was enforced due to the Coronavirus crisis. Prime Minister Narendra Modi has also stated that still there would be strict restrictions for the citizens and they have to maintain social distancing. This is a clear indication that the Indian Government is not going to take any risk regarding this pandemic.
Economic scholars around the globe are whispering about the global economic recession which is about to happen due to Corona Outbreak and the Indian economy is not untouched from it. So shall we assume that the Indian economy heading towards recession?
Coronavirus has knocked down the world economy severely something that is never seen before. The last recession in the world economy happened in 2009 when financial irregularities shook the global economy. That financial recession had crumbled the trade industry of the Indian market. This time the threat is new and invisible also.
We all know that the Indian government has sent all the sectors for a long 21 days holiday. You don’t need an economist to understand that 21 days of total lockdown is more than enough to curb the growth of the economy in any developing country.
Unemployment is always a burning issue in free India. According to the stats, in March 2020 India’s unemployment rate was 8.47% which is highest in the last 43 months. In the chart of the unemployment rate, India stands at the 95th position globally. Surprisingly, small countries like Mauritius, Nepal, and Indonesia which don’t have adequate resources are performing better than India on the global stage.
How Coronavirus will increase the Unemployment rate in India?
Though the worst impact of the Coronavirus on the unemployment rate in India is yet to happen. There are many factors which are directly proportional to the Coronavirus impact on the unemployment rate. Some factors are written down below:
- Revenue graph of the private sectors like the travel industry, the food industry, the fashion industry, and the bollywood industry will almost touch the axis due to the lockdown and this will result in companies having a lack of financial resources to start again. In compulsion, they shall have to kick out the employees and reduce the numbers. It is estimated that the tourism sector will lose Rs. 5 lakh cr and consequently 4-5 cr jobs will be cut.
- Many business outsourcing companies have lost their key accounts and are at a stage where it would be hard to match the BEP (Break-Even Point) again.
- The government has to open its treasure to sustain the country’s economic growth. This will put tremendous financial pressure on the treasury and the Government has to cut job offers in the future. We’ll be seeing less expenditure on infrastructure in the upcoming years.
- Indian banks will have to provide loans on low interest and other financial relaxations. This will increase the chances of fiscal deficit. It is a negative financial term which means a government’s expenditure would be more than revenue. It indirectly hurts the employment rate of a country. Indian finance minister Sitharaman expected a 3.8% fiscal deficit of GDP in her second union budget for this financial year 2019-20. Now, due to the Coronavirus outbreak, it will be more than expected.
This is the facts based prediction of how Coronavirus is going to hamper our economic growth and will create more unemployment. But there is also good news from the IMF. As per its reports, the Indian and Chinese economy will not hurt more due to the Coronavirus outbreak. Maybe because both countries have a large population and a very low per capita income. This report was published on 31 March 2020. Further, the report says that the world economy, except India and China, will face a recession after the Coronavirus crisis.