IMPACT OF COVID-19 ON INDIAN ECONOMY
Today the whole world is facing the pandemic of COVID-19, i.e. the novel coronavirus as a threat to the world economy. India has been in a total lockdown from the 24th of March 2020. The most important question is what will be the effect of COVID-19 on the Indian economy? Will the Indian economy face recession, if yes then what sectors will be impacted the most.
*SECTORIAL IMPACT OF COVID-19-
1. FMCG Sector
The 4th largest sector of the Indian economy is FMCG. For any FMCG company, the very first thing is- Raw material procurement, the second step would be- the production process, the third step would be- the demand which would lead to a sale, & the last one- realizing the money against which the sale has been made. As the production will fail, hence the sale will be affected. So, there are 4 major impacts on the FMCG sector, i.e. the raw material procurement, production, sale, and the liquidity impact.
2. Automobile & Spares Sector-
Germany is one of the hubs for anything related to automobiles. Now, the problem is that Germany is one of the countries which is pretty widely hit by the pandemic. Now, getting raw material procurement from such a country is a very big problem. The production capacity is definitely hit because demand itself is very less. Everyone understands that because of the pandemic, things may worsen in the first quarter of 2020-21. So, people might not want to spend money on luxury goods; that is why the demand has still dropped. So, on the sales front as well there are problems.
Many automobile companies already have heavy debt. So, if there is heavy debt & on top of that there is a drop in the sale, then liquidity crunch is going to be a very big problem for that. So, all in all, it’s a pretty gloomy picture for automobiles & spares sectors.
3. Pharma Sector-
India is one of the major exporters of generic medicines. So, the demand is not only from domestic India but it is even from abroad. But, the problem is that even if we are supplying a lot of medicine, 70% of raw materials come from China. So, if 70% of the pharma raw materials are coming from China, then, of course, the supply-chain of raw material from China to India is disrupted. On top of that even if we are trying to find the raw material substitute, many governmental authorities did try to ban certain exports.
What can we expect Post-19 –
Post COVID-19, people will be more cautious, they will be taking better care of themselves, which means that overall hygiene-related products demand will definitely be on the higher side. In fact, even the government might give Pharma Company some additional aid, so that they are able to keep up with the production & satisfy the demand from the general public. There could be some tax benefits which also might come in the way of the pharma sector.
So, overall it can be said that the Pharma sector is much better placed as compared to the other sectors.
ABOUT THE AUTHOR-
Abhinit Verma is currently a 3rd-year B.A.LL.B student at New Law College, Pune.
You can contact him at- https://www.linkedin.com/in/abhinit-verma-810236b8
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