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Wednesday, April 14, 2021

The Economic Cost of Lockdown

Coronavirus has spread through the world like a wildfire. In the wake of the COVID – 19 outbreak, India has undergone a 21-day aggressive lockdown. A lockdown of both the humans and material movement. Now the question arises here is what will be the economic cost of lockdown?.

Well, the lockdown is bringing the economy to a deadlock, no industry right from Auto, agriculture, aviation, consumer products are immune to the impending financial crisis for the current year. This lockdown has severely hit all the sectors. The trade and its cycle have paused. India Today has reported that, according to Barclays, the Indian GDP will dwindle to 2.5% from 4.5% due to the combative 21-day lockdown imposed on the country. Ben Bernanke, former chairman of the US Federal Reserve, has a more optimistic view of the situation, stating that if the workforce is taken care of, then no matter how long this emergency lasts, the economy will have a quick rebound.

So here we have presented some of the leading industrial sectors of the country and the impact of the lockdown on them. This will help you to understand and analyze the economic cost of lockdown and the current scenario of our country.

Agricultural Crashdown

The most crucial question raised during the lockdown is that does India has enough food to feed the whole population of the country? Thankfully the answer is ‘Yes.’  A website called grainmart.in has a few observations regarding the effects of the lockdown on the agricultural sector.

  • India is the second-highest consumer of wheat and rice globally. According to the Food Corporation of India (FCI), as on February 1, there was a surplus wheat reserve of 30 million tonnes as against the norms of a strategic reserve of 3 million tonnes while there are 27 million tonnes of rice reserve as against the 2 million tonnes strategic reserve.
  • Lockdown has entrenched the economic cycle of agriculture in two ways. Firstly the laborers fleeing away to their homes, and secondly, the Rabi season of crops has come to an end with the Kharif season following it.
  • The Rabi crop needs a harvest soon, and the sowing of seeds for the Kharif season is severely affected by the shortage of laborers and the inter-state movement restriction.
  • The closure of wholesale markets has further broken the supply chain. With this backdrop, agriculture in India faces a bleak production this year.

The Economic Times has reported that the food minister Ram Vilas Paswan has assured the people of India by saying that they have stepped up transportation for the movement of food grains to various manufacturers.

Automobile Brake fail

Business today has expressed concern for the lousy plight of the Auto industry in India following the 21-day lockdown. It has gone further to reveal a prediction of a production loss of 2,300 crores per day, resulting in a 50,000 crores overall production loss by the Society of Indian Automobile Manufacturers (SIAM).

With sales down to zero, mounting rents, salaries, and millions of jobs at stake, the Automobile industry is looking forward to a bailout package of maintenance from the Central Government. Also, Business Today has uncovered a vital concern raised against the Supreme Court to provide a solution for the BS-IV stock of vehicles (around seven lacs 20 thousand), which will be considered invalid from April 1, 2020, by Federation of Automobile Dealers Association (FADA).

Tourism sector paralyzed

The tourism industry, which contributes a good 10 percent to the GDP, can face some serious drop in their revenue if the pandemic doesn’t halt by the end of the year.

Business Today and The Economic Times share their collective views that the Foreign Tourist Arrivals (FTA) for the last month has dropped to 9.3 percent for the month and a yearly 7 percent, according to the government data. A drastic fall is seen in the FTA’s in February 2020 to 10.15 lacs as compared to 10.87 lacs in February 2019 to 11.18 lacs in January 2020.

Conclusion

Agriculture – As expressed by Business Today (BT) in its recent edition, the data which is provided by the National Statistical Office (NSO), states that the GDP has declined from 8 percent to 7.1 percent in Q1 FY’19 to 5.6 percent in Q3 FY’19. Also, the complete lockdown in the country and the production and supply of only essential goods and services, these figures may take a further plunge.

Automobile – There are possible chances of multiple scenarios. In the worst-case scenario, the GDP levels can drop down to 3.4 percent. This can lead to a recession as well. In the best-case scenario, there may be an increase in the GDP to 4.5 percent or if all goes well on the Indian and global front, the Indian markets may outperform, and the economic slowdown will remain for a manageable 3 to 4 months.

Tourism – All said and done, the economic cost of the lockdown will have its share of aftermaths within the country. The tourism and the Auto industry will take almost a year to be back on the tracks. The related sectors will also take a good enough time to shake off the effects and the losses incurred due to the lockdown.

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