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Indian Economy- Demonetisation and Corona – A Comparative study.

 S. Thilak, Assistant Professor, SIMS

Impact of Demonetisation:

            In November 2016 the Government took a bold step to ban 1000 and 500 Rupees note completely. This big step has taken to destroy fake currencies, resist tax evasion, extinguish the black money and terrorist financing and to look forwards towards cashless Digital India. This decision was taken for the welfare of the Country. Due to this decision there were many controversies and many faced many financial problems. There are few impacts because of the demonetisation are as follows.

1.MCRL Rates (Marginal cost Landing Rates) has increased in Several Commercial and Private Banks.

  1. Nifty fell apporx. 6.3% and BSE fell 5.9%. (just in month period)
  2. The targeted economic growth rate about 7.5% which was unable to achieve.
  3. India’s 45% of GDP are given by IT industries they also have been affected.
  4. The monthly average sales of real estates have reduced from 49% to 40%.
  5. FMCG industry has gone by 1% to 1.5%, the purchase of FMCG has gone down to 6.5%.

Note: The demonetization is not new to us, 10,000 rupees note where printed in 1938 and again in 1954. These notes where demonetized in 1946 and again in 1976. But this did not have any impact in the Economy because only 5% of the public where having this Currency.

Sectors 3rd and 4th

Quarter

 1st and 2nd

Quarter
(Rupee Billion)
Agriculture, Forestry and Fishing 7000.06 9961.67
Mining & Quarrying 1518.53 1786.33
Manufacturing 10078.78 10120.5
Electricity, Gas, Water Supply & Other Utility 1218.68 1187.23
Construction 4471.11 4475.57
Trade, Hotels, Transport, Communication and Services Related to Broadcasting 10200.22 11239.34
Financial, Real Estate and Professional Services 13676.84 10619.54
Public Administration, Defence and Other Services 6855.46 7444.56

*Source: Central Statistic Office(CSO)

            This impact was during demonetization, in which the economy had a short fall. Slowly we were able to get back to growth rate of our economy . But now we are facing an Economic Crisis which is affecting all the countries including our Country. This is because of World Health Threat, the virus out-break during Dec 2019 & Jan 2020 in Wuhan, China Novel Corona Virus.

Impact of Corona in Indian Economy:

Novel Corona Virus a new Threat to Global Man Kind. This was discovered in the recent times and the out break of this infection is more than what we have seen during the outbreak of SARS 2015. Due to this COVID-19 the world economy had short fall. Many Countries like Italy, China etc., have been suffering both physically and Economically. Even our country also facing the Economic crisis due to the out break of Novel Corona Virus.

            Indian’s Economy could take a hit of up to half a percent in this FY21 said by the Indian Economic Analysists.

  • There will be a hit of 0.3% to 0.5% in GDP in the next fiscal year. In the first 2 quarter it was 4%-4.5%. Maybe this may drop to 3.9% to 4% in GDP.
  • India cannot attain the planned 5% growth rate in the current fiscal year.
  • RBI expect the current account deficits would be 22-24 billion dollars.
  • Trade deficit fell to the lowest level of 9.85 billion dollars.
  • The Exports declining at the rate of 2.91% in February 2020 it was 27.65 Billion Dollars.

Let’s see what all the sectors which have been affected due to this COVID-19 outbreak.

1.Aviation:

585 international flights have been cancelled by the private passengers in March 6. On March 12th India has cancelled all the Visas which was issued earlier. India’s largest airlines has reported that they had 10%-15% of Decline.

  1. Hospitality:

            The restaurant business has fallen by 35%. The average occupancy has fallen from 70%-75% to 20%. National Restaurant Association of India has reported that restaurant’s business has been declined to 35%.  Many of the Multiplexes from major cities they have been shut down.

3.Apparels:

            Many countries have denied the products from India almost 35% of apparels are waiting for the Exports. More than 60% of the revenue of Apparels comes from Export which is almost one lakh crores.

  1. Consumer Durable and Electronics:

            More than 15% of Consumer Durables has fall in during the period of Jan-Mar 2020. India Imports more than 45% of Accessories and Spares from China which is also denied.

  1. Poultry and Seafood:

            More than 30% fall in demand of chicken in past three week. Poultry industry are forced to sell the chickens at a cost of 30rs. The stock pileup for the Poultry Industry due to the outbreak of the Virus and the Fake news which was circulated among the public is cause of the pileup. Many European countries and many other countries have denied the Export of Seafoods.

            Due the outbreak of Novel Corona Virus (COVID-19) many sectors have their decline stage and Indian Economic growth is started to fall down. Imports and Exports have stopped for the short period of time due to that Tons and Tons products have been stocked to delivered. If this situation continues many businesses is going to end up. Analysist are predicting that the situation is going to still worse in the month of April and May.

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