(Updated on April 07, 2021)
After the devastation caused by first wave in 2020, the recent spike in Coronavirus cases in April 2021 is scaring the nation. According to Government, Coronavirus is spreading faster in the country compared to last year. On April 6, addressing a media conference, Dr VK Paul, Member-Health, Niti Aayog said, "The impact of the pandemic has increased in the country. Warnings were given that the situation should not be taken for granted. The situation of the pandemic has worsened and the speed of increasing COVID-19 cases is higher than last time." Given the importance of this GD Topic, MBAUniverse.com presents a complete update on COVID 19. In addition to GD Round, this is also appearing in personal interview round. In many IIMs interviews, questions are being asked on impact of COVID 19 wave 2 on Indian economy and related aspects. So be ready!
People Participation is key to control second wave
Union minister for Health and Family Welfare Dr Harsh Vardhan said, "We can still control the pandemic, people's participation vital to control second wave of pandemic, next four weeks very critical for us. People's participation is vital to control the second wave. The entire country has to come together and make efforts to fight the pandemic."
Dr V K Paul said the pandemic situation in the country worsened with a sharp rise in cases and a large part of the population is still susceptible to the virus. The tools to fight the pandemic remain the same. COVID-appropriate behaviour, containment measures, testing have to be implemented more efficiently, medical infrastructure has to be ramped up and vaccination drive intensified, he said. COVID-appropriate behaviour like wearing masks, staying away from crowds have to be followed in a campaign mode, Paul reminded people.
- The daily rise in COVID-19 cases in India crossed the grim milestone of one-lakh from 20,000 infections in just 25 days, unlike last year when it took 76 days for daily cases to reach the then peak of 97,894 on September 17, reflecting the speed at which the virus is spreading.
- As on day 81 of the vaccination drive on 6 April, a total of 33,37,601 vaccine doses were given.
- India surpasses US to become the fastest Covid-19 vaccinating country in world
Cases overview in India and the World as on April 6
Here is the latest date on Covid 19 cases from John Hopkins University USA.
Economic Impact of COVID 19 on India
Indeed, in 2020, the economic impact of the coronavirus pandemic in India has been disruptive. India's growth in the fourth quarter of the fiscal year 2020 went down to 3.1% according to the Ministry of Statistics. The Chief Economic Adviser to the Government of India said that this drop is mainly due to the coronavirus pandemic effect on the Indian economy. Notably India had also been witnessing a pre-pandemic slowdown. So this was a double whammy.
The World Bank and rating agencies had initially revised India's growth for FY2021 with the lowest figures India has seen in three decades since India's economic liberalization in the 1990s. However, after the announcement of the economic package in mid-May, India's GDP estimates were downgraded even more to negative figures, signalling a deep recession. Of course, it was not just India but the ratings of over 30 countries have been downgraded during this period. On 26 May, CRISIL announced that this will perhaps be India's worst recession since independence. On 1 September 2020, the Ministry of Statistics released the GDP figures for Q1 (April to June) FY21, which showed a contraction of 24% as compared to the same period the year before. According to Nomura India Business Resumption Index economic activity fell from 82.9 on 22 March to 44.7 on 26 April.
However, by September 2020, economic activity was nearly back to pre-lockdown. During this period, unemployment rose from 6.7% on 15 March to 26% on 19 April and then back down to pre-lockdown levels by mid-June. During the lockdown, an estimated 14 crore (140 million) people lost employment while salaries were cut for many others. More than 45% of households across the nation have reported an income drop as compared to the previous year.
Supply chains have been put under stress with the lockdown restrictions in place.Those in the informal sectors and daily wage groups have been at the most risk. A large number of farmers around the country who grow perishables also faced uncertainty. Vendor of greens, essential supply chains and logistics. Last year, Stock Markets in India posted their worst loses in history on 23 March 2020. As economy recovered in 2021, stock market rose sharply to hit all time highs.
Government of India Measures
The Government of India announced a variety of measures to tackle the situation, from food security and extra funds for healthcare and for the states, to sector related incentives and tax deadline extensions. On 26 March a number of economic relief measures for the poor were announced totaling over ₹170,000 crore (US$24 billion). The next day the Reserve Bank of India also announced a number of measures which would make available ₹374,000 crore (US$52 billion) to the country's financial system. The World Bank and Asian Development Bank approved support to India to tackle the coronavirus pandemic
The different phases of India's lockdown up to the "first unlock" on 1 June had varying degrees of the opening of the economy. On 17 April, the RBI Governor announced more measures to counter the economic impact of the pandemic including ₹50,000 crore (US$7.0 billion) special finance to NABARD, SIDBI, and NHB. On 18 April, to protect Indian companies during the pandemic, the government changed India's foreign direct investment policy. The Department of Military Affairs put on hold all capital acquisitions for the beginning of the financial year. The Chief of Defence Staff has announced that India should minimize costly defense imports and give a chance to domestic production.
On 12 May the Prime Minister announced an overall economic stimulus package worth ₹20 lakh crore (US$280 billion), 10% of India's GDP, with emphasis on India as a self-reliant nation. In December 2020, a Right to Information petition revealed that less than 10% of this stimulus had been actually disbursed. During the next five days the Finance Minister announced the details of the economic package. Two days later the Cabinet cleared a number of proposals in the economic package including a free food grains package. By 2 July 2020, a number of economic indicators showed signs of rebound and recovery. On 24 July the Finance Secretary of India said the economy is showing signs of recovery at a faster rate than anticipated, while the Economic Affairs Secretary said that he expects a v-shaped recovery for India. On 12 October and 12 November, the government announced two more economic stimulus package, bringing the total economic stimulus to ₹29.87 lakh crore (US$420 billion) — 15% of national GDP — uptil 31 October 2020. Government of India had also announced Rs.20 lakh crore relief package to revive the economic growth. The Reserve Bank of India has already announced the key policy measures to counter economic slowdown and joined the fight against the corona virus.
COVID-19 Vaccination in India
On 16 January 2021 India started its national vaccination programme against the COVID-19 pandemic. It is a matter of great pride that on April 6, India surpasses US to become the fastest Covid-19 vaccinating country in world.
The drive initially prioritises healthcare and frontline workers, and then those over the age of 60, and then those over the age of 45 and suffering from certain comorbidities.
In January 2021 Secretary-General of the United Nations António Guterres said that India's vaccine-production capacity is the best asset the world has.
On 1 January 2021, the Drug Controller General of India, approved the emergency or conditional use of AstraZeneca’s COVID-19 vaccine AZD1222 (marketed as Covishield). Covishield is developed by the University of Oxford and its spin-out company, Vaccitech.
On 2 January 2021, BBV152 (marketed as Covaxin), first indigenous vaccine, developed by Bharat Biotech in association with the Indian Council of Medical Research and National Institute of Virology received approval from the Drug Controller General of India for its emergency or conditional usage.
According to health officials, India has administered 8,70,77,474 (87 million) vaccine doses across the country as of 6 April 2021.
COVID 19 – An opportunity for India? The Positive Impact
Economists are of the opinion that the disruption caused by the virus in China could pave way for more long term foreign investments in emerging economies like India as the world looks to reduce dependency on China, the largest manufacturing hub in the world. Experts feel that India has a good chance of becoming an attractive manufacturing hub given the present situation, provided the government changes some of its trade policies to bring down commodity prices. An example of Vietnam, which has gained a huge growth boost due to higher density of electronics manufacturing, is before everyone.
According to the Chief Economic Advisor of India, Krishnamurthy Subramanian the coronavirus outbreak in China provides an opportunity for India to expand exports. India is one of China's leading trade partners in Asia and has a huge trade deficit with that country.
Sharing his views at IIM Calcutta, Subramanian said, “The coronavirus outbreak in China provides a good opportunity to India to expand trade and follow an export-driven model." He said that China imports a lot of components, parts, assembles and integrates and then exports them. "India has been following the same pattern in terms of mobile manufacturing in the country. So, if one looks from this perspective, it provides a good opportunity for India." said Subramanian
In November 2020, Fitch Ratings said the revival of the government's reform agenda in response to the coronavirus pandemic shock has the potential to raise India's medium-term growth rate. It said raising medium-term growth rates under these circumstances will require reforms to support investment and boost productivity and it will take time to assess whether the reforms are implemented effectively.
"Fitch Ratings believes that the revival of the central government's reform agenda in response to the coronavirus pandemic shock has the potential to raise India's medium-term growth rate. Nevertheless, there are also downside pressures to growth and it will take time to assess whether the reforms are implemented effectively," the agency said in a statement.
Raising medium-term growth rates under these circumstances will require reforms to support investment and boost productivity, Fitch said, adding it expects the government to remain generally reform-minded over the next few years. For the current fiscal, Fitch Ratings has projected a 10.5 per cent contraction in Indian economy.
Several reforms passed by Parliament since the pandemic set in, could lift medium-term growth prospects, including the agricultural reforms to give farmers more flexibility over where to sell their produce, it said. Stripping out middle men, as the reform allows, could improve farmer incomes while reducing consumer prices.
Parliament has also passed labour reforms. Their intent, among other things, is to improve worker access to social security notably in the large unorganised sector, strengthen occupational safety requirements, speed up the resolution of labour disputes and ease migrant workers' ability to move between states.
In addition, employers will now only need prior state government approval for redundancies if they have over 300 workers, up from 100 previously, and state governments may raise this threshold. "These changes could support formalisation of India's labour market and improve its flexibility, with positive efficiency gains, but our assumption is that in practice their impact will be modest," it added.
The government also intends to privatise some state-owned enterprises, of which more than 200 are owned by the central government and 800 by state governments. A wide-ranging privatisation push could be transformative, it said. Fitch said the process of reforms in India remains especially complex and implementation at times has proven difficult.
In recent years, the government has opened more sectors to FDI, but also raised international trade barriers and withdrawn from the Regional Comprehensive Economic Partnership before its recent agreement was secured. Meanwhile, two landmark reforms from the government's previous term faced set-backs recently due to the pandemic.
The Insolvency and Bankruptcy Code has been suspended temporarily in line with forbearance regulations for banks, while a decline in inflows from the Goods and Services Tax will make it more challenging to divide these revenues among the centre and the states, Fitch said.
COVID 19 Impact on MBA Education
Global higher education including MBA education is also affected as even the top MBA colleges of the world like Harvard, Chicago Booth, Wharton, Stanford, Kellogg, MIT Sloan and hundreds of others have decided to move to online teaching instead of class room teaching. Besides, the B-schools have extended their spring break, have stopped international exchange programs, have cancelled the events like convocation, have restricted international travel and have taken other measures to restrict the movement of students and faculty. In India also, B-schools have postponed their Convocations, delayed admission process and session commencements, and are conducting awareness programs for Corona virus.
Leading institutions such as IIM-Ahmedabad, IIM-Kozhikode, IIM-Indore, IIM-Trichy, Bhavan’s SP Jain Institute of Management & Research (SPJIMR), IIT-Bombay, IIT-Kanpur have introduced measures including postponing of events and large gatherings, imposing travel restrictions and holding extensive awareness generation sessions on campus about the outbreak.
In 2021, things were coming back to normal at B-schools, but the second wave has put spanner in the works. Admissions and Placements are likely to be impacted.
Overall, we can say that while COVID 19 presents a big challenge for India, there are two big positives for India:
- Structural Reforms taken by Government of India in 2020 and in 2021 Union Budget to make India economy more competitive
- Rapid Vaccination Drive in India. On April 6, India surpasses US to become the fastest Covid-19 vaccinating country in world
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