NEW DELHI
Even as economists predict dip of nearly 1% in India’s economic growth due to coronavirus or COVID-19 outbreak, officials believe that a large informal sector will help the country’s economy to stay afloat.
“India is relatively insulated from the global value chain and to that extent impact on India will be less,” Governor of Reserve Bank of India Shaktikanta Das told reporters.
Echoing Das’s prediction, Pronab Sen, former head of the National Statistical Commission told Anadolu Agency that India will be able to absorb the shock, despite dependence on China for raw material for its manufacturing sector.
“While larger companies are more vulnerable to government-imposed restrictions, India will be better off, in comparison to other countries, due to the high dominance of the informal sector," he said.
"In India, the share of the informal sector in the market is more than 50%. These restrictions will not affect this grey market," he added.
Sen, however, said the resilience will depend on how long the lockdown lasts. It also depends on India’s efforts to contain the spread of the virus.
“If the lockdown continues more than three months, it will be very damaging for the country's inventory holdings,” said the former officer, who has analyzed vital official data related to the Indian economy.
“Our imports are heavily dependent on China, and thus the production will remain affected. Generally, inventory holdings can last up to two-three months, but if the lockdown goes beyond that, then it will be very damaging. For India, in the initial stage, imports will be more affected than exports," Sen added.
While the situation in China is slowly stabilizing, with some factories getting back to their schedule, Sen believes that they will be having a huge backlog to clear. He said that it was an opportunity for India to fill the gap.
India’s Chief Economic Adviser, Krishnamurthy Subramaniam told reporters that the fall in Indian stock indices was lower than the decline witnessed globally. He said the situation in the country will stabilize over the next few weeks as focus shifts to economic fundamentals like declining inflation, growing industrial production and adequate forex reserves.
The National Stock Exchange in India recorded over a 20% fall between Feb.20 and March 17.
Subramanian said current developments in the market are all related to global factors. "The countries like Russia, Brazil, France, Germany, Argentina, the U.K., the U.S., and Japan witnessed around 20% fall in stock prices from Jan. 31- March 12," he said.
- Impact on traders
Despite the optimism shown by the experts, sectors like tourism, aviation, hospitality, and trade have already taken the brunt of the severe curbs imposed by the governments across the world.
Traders in India have estimated $4.04 million losses over the past three months.
Speaking to Anadolu Agency, Secretary-General of the Confederation of All India Traders Praveen Khandelwal, said most of the losses have been incurred by the mobile and electronic industry.
“Loss of production in China was estimated 85%-90% in February and 40%-60% in March. Since India is dependent on China for import of finished goods, raw material required for production and spare parts for assembling finished goods, therefore, the production loss is affecting us,” said Khandelwal, whose organization represents over 70 million traders in India.
"Unfortunately, no efforts were made by the industry to develop alternate sources of finished goods, raw material or spare parts over past years. This is the key reason for the high impact on this industry in India,” he said.
A report issued by the UN Conference on Trade and Development estimated that India could lose $348 million and declared it among the top 15 most-affected economies, after the EU, the US, Japan, and South Korea.
To contain the virus, India has taken several preventive measures, including social distancing, which has led to a temporary shutdown of various businesses, resulting in a drop in economic activity.
- Film industry affected
Among those affected include India’s multi-billion-dollar film industry.
Speaking to Anadolu Agency, the President of the Indian Film and Television Directors' Association, Ashoke Pandit said the curbs on social gathering has led them to cancel the schedule for outdoor shooting scenes.
“Each outdoor shooting unit involves a minimum of 200 people. Such large gatherings can put the community at risk. Thus, it was unanimous decision to stop shootings until March 31,” he said.
He said while the cine industry was losing a whopping $67 million, the lives of people were more important.
“We cannot put people’s lives at risk by calculating profits and losses at these times. Most film release dates will have to be changed, “he said.
The suspension of all existing visas and a ban on the entry of passengers from EU, U.K., Turkey, Afghanistan, Philippines, and Malaysia, the tourism industry has received a major blow.
"The COVID-19 outbreak could impact India’s overall economic growth up to 90 basis points or 0.9% (close to 1%) through trade, hotels and transport channels between 2019-20 and 2020-21. India could lose an estimated three million tourist footfalls in the calendar year 2020 and foreign exchange of about $7 billion in related sectors," said a report in a Bangalore based English language newspaper Deccan Herald.
