Effect of Pandemic on Indian Economy

19 Feb 2021

Curtain Hug


CORONAVIRUS disease (COVID-19) is an infectious disease which has spread worldwide with its great severity. In late 2019, when almost everybody was in a festive mood, the “move” of this micro virus occurred. Although primarily treated casually, it started showing its vulnerability within a few days, resulting in an outbreak of the pandemic worldwide. During this era, some words like Lockdown, social distancing, sanitization, musk took place in our daily life like never before. This outbreak brought the nation's social and economic life to a standstill. A choice between the health of the people and the health of the economy is a hard one to make and lockdown and social distancing were the only cost effective tools found and taken by the Government to prevent the spread of Covid-19. Ensuring mankind to its life, all the resources have been diverted to meet the never experienced crisis before, putting the livelihood in great danger. As the virus has its multi sectoral impact, the crisis has been transformed into an economic and Labour market shock, impacting not only supply (production of goods and services) but also demand (consumption and investment). Unemployment rose, salaries have been cut-off; more than 45% of households across the nation have reported an income drop as compared to the previous year. Aviation and tourism, agriculture, education, logistics, automobiles, healthcare, IT, media and recreation, Bank, real estate in every sector, economic stress has started and grew rapidly.


It’s true that sometimes events occur that nobody could ever predict and their extent creates havoc in human activities and life. Ever since COVID-19 strike, markets plunge into fear as uncertainty prevails. During lockdown, the stock market reflected its influence upon investors, domestic and international alike and came crashing down along with the upsurge of the pandemic. Companies having scaled back layoffs have multiplied and employee consumption have been affected resulting in a total negligible growth during this time. Tourism entertainment and hospitality like sectors have been impacted adversely and stocks of such companies have dropped more than 40%. During the last week of March, 2020, when lockdown began, stock markets in India posted their worst losses like never before. SENSEX fell around 4000 points (13.15%) and NSE NIFTY fell around 1150 points (12.98%). Payment deferrals, subdued loan growth, rising cases of bad loans and sluggish business conditions have impaired the growth rate and the health of the economic activity. Retardation in demand supply chain, GDP growth, cut in capital expenditure and discretionary expenses has been observed during lockdown which has led to falling in marketing spends, household incomes and reduced market cost.
As a result of that, only FMCG companies like Nestle India, Bharati Airtel have seen their stock surging whereas rest, saw a steep decline. The most prominent sector among the losers was the Banking Sector. During lockdown, the NIFTY bank index lost more than 40% of their market value where one third of the banking stocks related to the index plummeted more than 50%. Few large scale and most of the medium scale businesses became standstill. Most importantly, as people are not able to move out from their houses or do so only if it is required due to the fear of getting infected, the propensity to hoard more cash has increased the ATM withdrawal which has worn the present deposits as well as put a halt to new deposit growths. The asset erosion in the form of decline in quality of receivables and demand as well as time deposits coupled with the burden of liability created the asset liability mismatch and all these factors have driven the banking sector in a consistently fore fronted lose value.

Exports and Imports

India's exports in April 2020 fell by -36.65% year-on-years while imports in April 2020 fell by -47.36% as compared to April 2019.

Impact on GDP growth rate

The World Bank report said that the pandemic has "magnified pre-existing risks to India's economic outlook".

Crypto Currency

Crypto currency is a digital asset meant to be used as digital money. Bitcoin is the most popular crypto currency currently used and they have transformed the way by which all global markets' networks are virtually connected with each other. Like any other industry, the crypto currency market has been affected by the pandemic but its effects were not entirely negative, Covid -19 has already driven more people to seek financial shelter in traditional hard assets such as Gold and crypto currencies like bitcoin. The trading volume of crypto currencies in India has increased by 400 percent during the nationwide lockdown. The Boom in crypto trading and bitcoin liquidity has also increased when Supreme Court has lifted its ban earlier in 2020 and several new players and investors have entered in this crypto trading market during the last few months because it is an attractive option for investment as they do not have any direct correlation between them and traditional investments. During pandemic, digital money and Fin-tech apps have seen massive usage growth resulting in catching the pace of overall technical progress very rapidly.
As central banks cut interest rates to near zero, or even into negative territory, more savers have turned to the world of “decentralized finance” (or Deify) interest-earning platforms, a number of which have been started by Indian entrepreneurs. The value in DeFi platforms has more than doubled to over $855 Mn, and these platforms offer significantly greater interest rates (6% annual savings rates or more) on crypto currency deposits compared to what is available with traditional fiat bank deposits. There are a number of non-currency uses of block-chain technology that may also receive a significant push in the wake of Covid-19. E-health passports and digital identity, food supply chain tracking, and electronic voting are just some of the broader uses of block-chain technology that are being proposed to help with the Covid-19 response and to mitigate the effects of future pandemics.
Crypto currencies have other benefits also during Pandemic. It has reduced the cost of payment delivery, facilitated payment to individuals lacking access to bank accounts or low-cost cheque-cashing services. supported some of those most in need who lack a physical mailing address, or to those who have relocated recently (e.g. students), encouraging digital forms of payment that may help to reduce the rate of virus transmission as compared to debit card and cheque use. Moreover, the receipt and use of digital payments can be more easily tracked to ensure individuals have received financial support and solve the significant “lost cheque” problem. So, it is definite that Covid-19 pandemic has already hastened our transition to a more efficient and transparent block-chain-powered financial infrastructure.
To control the spread of COVID-19, all economic activities were shut down which is unique in terms of a supply shock, a demand shock and a market shock. While policy and reforms should be allocated by the Government adequately to retrieve the economy, the industry, civil societies and communities have an equal role in maintaining the equilibrium. The norms of social distancing, avoiding or cancelling gathering and use of masks and sanitizers should be the way of life till we are able to eradicate the virus. Covid-19 pandemic has a clear message for Indian Economy to adopt sustainable developmental models which are based on self-reliance, inclusive frameworks and are environmentally friendly.


1) "INDIA'S FOREIGN TRADE: April 2020". pib.gov.in. Ministry of Commerce & Industry. 15 May 2020. Retrieved 15 June 2020.
2) Monika Chaudhary, P. R. Sodani, Shankar Das. Effect of COVID-19 on Economy in India: Some Reflections for Policy and Programme, Journal of Health Management 22(2) 169–180, 2020.
3) "A Bigger Hit on the Economy?". The Economic Times (ET Graphics). 21 May 2020. p. 1. Retrieved 21 May 2020.