COVID-19 Pandemic and Government Initiatives: Measuring Impact on Indian Economy

India was among the nations that were able to largely shield themselves from the global recession in 2007–08. The economy navigated the roadblocks and drove towards a consistent growth over the next decade. Despite hurdles, the country was forecasted to become a 5- trillion-dollar economy in the near future.

Unfortunately, the onslaught of the COVID-19 pandemic has washed away those years of growth. Following restrictions and frequent lockdowns, industries, markets, and the economy is struggling to get back on its feet.

The fear of virus has diminished consumer sentiment and led to a sharp fall in demand as well as manufacturing. During the past one year, almost every sector has reported a decline in its finances.

The numbers which represent the health of the economy, have also been significantly jolted. The GDP shrank by 7.3 percent during 2020–21, marking a shocking reversal of decades old trend of positive growth. And the unemployment data has revealed that almost 73.5 lakh people lost their jobs in April this year alone.

Besides, just when the industries were rebuilding their businesses, the second wave of the pandemic hit much harder. Unlike the first, it even spread to the rural regions of India and had a devastating impact. If Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) is looked upon, a steep rise in the demand for jobs in rural households can be easily observed.

Unsurprisingly, the worst hit sectors were travel, tourism and hospitality, which rely on movement of people for their business to flourish. In my view, the restrictions laid down by state governments to contain the infection have adversely disrupted the supply chain. Moving forward, it will be wise to have a balanced approach and consult all the stakeholders to prevent economic fallout; in cases where localized lockdowns are necessary.

Not with standing the facts, I feel that there is a need to be robust in our collective endeavor to bounce back. The demand side of goods consumption by common people contributes almost 55 percent of the total GDP. It is strongly required to take measures which improve private consumption expenditure.

However, even during such chaotic periods, sectors like agriculture have demonstrated an upward growth. The manufacturing sector is also on the path to resurgence. I believe that this trajectory is due to faster revival in advanced economies, which have increased export orders from Indian makers.

There are also indications of recovery from the government’s revenue collection stream. For the period of 2020–21, the gross-tax revenue (GTR) stood at Rs. 20 lakh crores. In addition, the net tax revenue also reached Rs. 14 lakh crore.

Further, fiscal deficit appears to give hopeful signs. The government has already announced their target of achieving a fiscal deficit target of 4.5 percent of GDP by 2025–26. I believe this goal to be feasible, provided that tax compliance increases and the government finds more innovative ways of revenue generation.