Half Of India’s Economy To Function Under Complete Shutdown, Says Study

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Half Of India’s Economy To Function Under Complete Shutdown, Says Study
Half Of India’s Economy To Function Under Complete Shutdown, Says Study
Himali Patel - 30 March 2020

Mumbai, March 30: Although measures taken by the Finance Minister and the Reserve Bank of India (RBI) governor would aid the economy due to impact of COVID-19, it would not immediately bounce back post the exigencies are over. As per Anand Rathi Share and Stock Brokers research on economy, the downside can be expected with the further lockdown beyond April 14, 2020. However, unless the lockdown extends beyond 45 days, the broking firm doesn’t see a recession in India.

“We expect appropriate policy measures to be rolled out to avert a credit/ debt market freeze, a sharp rise in bankruptcy and unemployment. Also, we do not expect a meltdown in private spending. In the post-COVID-19 world, there are possibilities of major alterations in consumer and business behaviour, leading to structural changes,” says Sujan Hajra, Chief Economist, Anand Rathi Share and Stock Brokers.

As per their assessment, despite a total shutdown, approximately 50 per cent of value-added activities would continue. In many cases, although the activities such as food production, utilities, transportation, communication, trade related are exemptand despite being operative through minimal staff and work from home option, the productively levels could be low. Further considering the nature of activity such as Rabi sowing, despite having an exempt status, there are relatively subdued levels of activity in crop production. The total shutdown till April 14, 2020, is unlikely to have a large impact on agricultural production, especially for Rabi where sowing is done between November 2019 and February 2020.

Similarly, when it comes to the contribution of public administration and defence, which is measured by input, this would not have any impact of COVID-19 as government has announced salary protection. Courtesy the government measures, India, as a nation, has acted ahead of other countries in terms of lockdown that has flattened the curve as compared to the other nations. “A three-week lockdown in India would give the authorities time to improve medical preparedness, carry out more testing and isolate the infected and high-risk individuals from the general population. Therefore, a phased withdrawal of the complete shutdown from April 15 2020 is a distinct possibility,” says Hajra.

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