ECONOMY IN SHAMBLES
14 Oct 2021
Economy can be known as, the process of generating revenue from the activities like production, consumption, trade of goods across nations and services in an area. From small families, corporations to the whole governmental system, all participate in this process of forming the economy of a country. In other words, the wealth and the resources of a country or region, in terms of production and consumption of goods and services of a country is known as the economy (of a country in particular).
Types of Economic systems-
There are four types of economic systems in the world-
Traditional economic system- This type is based on family/community which basically depends upon customs and rituals. For e.g. Amazon Tribes etc.
Command economic system- In this, the government commands the producers about, what is to be produced, when and how and for whom. For e.g. China, Iran etc.
Market economic system- This economic system is consumer friendly as it depends upon the consumption choices of the consumers. For e.g. USA, Japan etc.
Mixed economic system- This can be defined as an economic system comprising both the private and the public enterprise. In other words, both the public and the government are allowed to participate & interfere in the economic activities of a country.
India's economy is neither fully socialist or capitalist. It is a mixed economy. It has aspects of both an open system and a free market economy. India is the world’s sixth largest economy by nominal GDP and the third largest by the purchasing power parity (PPP). The Indian economy witnessed a dip in 2017, due to the ‘demonetization’ in 2016, and addition of the ‘Goods and services tax’ in 2017. India was the ninth largest importer and the twelfth largest exporter in 2019. Also, India’s labor force as of 2019 was the second largest in the world.
Now that we know that India was quite a decent economy, when it came to ranking high in different sectors. Let us now look at the Indian economy after the Covid-19 stroked India.
Impact of Covid-19 on the Indian Economy-
Many rating agencies downgraded India’s GDP predictions for FY21 to negative figures, the most severe since 1979. According to a ‘Dun & Bradstreet report’, India was likely to suffer a recession in the third quarter of FY2020 as a result of the 2 month and above nation-wide lockdown. The sharp drop in the GDP is the largest in India’s history, and the most economic damage has been borne by the poorest households.
From April to June 2020, India’s GDP dropped by a massive 24.4% (Swati dhingra & Maitreesh ghatak, 2021).
According to the latest national income estimates, in the second quarter of the 2020-2021 Financial year, the economy contracted by a further 7.4% with the third and fourth quarters seeing only a week’s recovery, with GDP rising 0.5% and 1.6% respectively. The country was still recovering from the shocks of demonetization and introduction to the GST, experiencing an economic slowdown already, that this pandemic increased the risk to the Indian economy said by the World Bank.
Effects of the Pandemic in India-
Poor Households- All across the country, more than 45% of the households have reported raw income drops in 2020, as compared to that of in 2019 (Priyadarshini, 2020). The poor households were at a huge risk of becoming even poorer as most of them were daily wage workers, so the nation-wide lockdown affected their households particularly very negatively.
Education- The education had to take an unpredictable shift from offline to online mode creating a digital divide amongst urban, rural and remote rural area based learners.
Employment- The already employed citizens were not well off either, as they reported that there were salary cuts and some were even fired from their jobs due to the financial crunch in the companies, leaving many of them unemployed. And the one’s seeking employment had to stop seeking one, as the companies were not willing to hire new employees due to them already being in losses.
Recovery of the Indian Economy-
The government has ensured many schemes and measures that can help and are helping in the revival of the Indian economy:-
Digital India- This measure ensured digital payment, and cashless payment to continue the selling purchasing activities for the revival of the economy.
Atmanirbhar Bharat Abhiyan- Honorable prime minister of India launched this scheme, by declaring a Covid relief package of INR 20 trillion in may 2020.
Schemes like MGNREGA and PM-KISAN yojana, impacted positively to people, especially those belonging to rural areas.
Make in India campaign- Ensured employment to those who were left unemployed, as they were daily wage workers.
India is at a crucial place to stand against the covid-19. And has responded with courage and determination surviving the deadly 2nd wave also. All the above mentioned measures have worked to the advantage of the economy in combating the slowdown ensuring long-term positive effects on the Indian Economy.
By- Smridhi Nangia