TUTORIAL 2: ECONOMIC IMPACTS OF COVID 19

Submitted by:
V SOORYA SHRINIVAS (20010324143)
VIKRANT RATHORE (20010324149)
RAHUL SHAH (20010324100)

SEPTEMBER, 2022
Under the guidance of
Prof. Rajnikanth M.

SYMBIOSIS LAW SCHOOL HYDERABAD

SYMBIOSIS INTERNATIONAL (DEEMED) UNIVERSITY

INTRODUCTION…………………………………………………………………………...

LITERATURE REVIEW………………………………………………………………..…..

RESEARCH OBJECTIVES………………………………………………………..………..

RESEARCH METHODOLOGY:

SCOPE OF STUDY……………………………………………………………….………….

RESEARCH DESIGN………………………………………………………………………….

DATA COLLECTION TECHNIQUES AND METHOD OF ANALYSIS…………………...

LIMITATIONS………………………………………………………………………………..

DATA ANALYSIS AND INTERPRETATION…………………………………………….

FINDINGS, SUGGESTIONS AND CONCLUSION……………………………………….

REFERENCES……………………………………………………………………………….
 INTRODUCTION

The COVID-19 19 pandemic that originated from Wuhan, China, first case reported on the
17th of November 2019, was never expected to turn into a pandemic of this scale. Infecting
anyone and everyone regardless of the geography, race, age or gender. This has caused a
great ordeal of trouble and pain to the citizens of this world. Affecting every aspect of our
life. These are hard times and without any readily available remedy things don’t seem to
calm. 

The virus has not only caused health issues but has greatly trifled with the finance systems of
the world causing an economic downturn worldwide.

This virus spreads from person to person through close contact. So to stop the transmission,
WHO and all the governments across the globe have advocated social distancing to keep at
bay the transmission rate of the infection. Lockdowns and curfews were imposed for further
protection.

These restrictions and safety measures taken by the government had adverse effects on the
economy.

 These curfews created vortices in the supply chains, essential for trade. 
 The lockdowns led to closing of factories leading to low production.
 These closing of factories also contributed to loss of jobs.
 Low production, loss of jobs and inefficient supply chains led to low income
generation.

This is the state of the economy in a plain overview. These issues, when looked closely had
various impacts. The COVID-19 though a life-threatening disease, threw light on various
shortcomings of financial governance systems on a global scale.
 RESEARCH OBJECTIVES

1. To assess the economic impact of the Covid 19 pandemic on the Indian economy
2. To assess the sectoral impacts on the Indian economy on the basis of the Covid pandemic
3. To analyse the quantitative impact on the economy as an overall factor due to the Covid
pandemic

SCOPE OF STUDY

1. This paper aims to assess the impacts of the Covid-19 pandemic on the economy.
2. This study is limited to the early periods of the pandemic and analyses the quantum and
the resurrective measures that the government should take, for the same period.
3. This study analyses the quantitative and qualitative impact of the Covid-19 pandemic on
the economy up until August 2021
 LITERATURE REVIEW
In order to cover each and every aspect of the topic the researcher had taken into
consideration a vast number of articles, papers, journals and statistics. Some of the major
literature which facilitated the researcher to come up with this paper are discussed below.

‘COVID-19: Key measures taken by governments and central banks’ by ECO FLASH, this
research paper enabled the researcher to get in depth analysis as to what where the approach
adopted by the government and central banks to stabilize the economy after the impact of the
pandemic. (Henford, 2020), ‘The Global Economic Impact of COVID-19: A Summary of
Research’ by Prof. Shlomo Maital was another research paper which enabled to expand the
horizon on the economic impact of Covid-19 (Maital, 2020), ‘The response of Reserve Bank
of India to Covid-19: Do whatever it takes’ by Rakesh Mohan, this article aided the
researcher in understanding what the Reserve Bank of India did to absorb the impact of the
shock and also it enabled the researcher to know in depth as to how central banks can play a
major and a critical role in reviving an economy (Mohan, 2021), ‘The COVID-19 pandemic:
Impacts on cities and major lessons for urban planning, design, and management’ by Ayyoob
Sharif, this paper was also one of the key source which the researcher relied upon for
information regarding the socio-economic and urban management aspect after the pandemic
(Sharif, 2020). ‘Economic Impacts of the COVID−19 Lockdown in a Remittance-Dependent
Region’ by Anubhab Gupta this article talked about the financial downfall that the country
faced and also provided the researcher with statistics that further added to the value of this
paper and this paper also indicated the concern of the governments regarding future safety
from such kind of pandemics (Gupta, 2021), ‘Potential Economic Impacts of the COVID-19
Pandemic on South Asian Economies: A Review’ by Md. Monirul Islam was also a cardinal
part of research, this basically talks about the impact of covid-19 specifically on south Asian
countries and also talks about the various scenarios related to the same (Islam, 2020).
 WHAT DID GOVERNMENTS AND CENTRAL BANKS DO?

In a situation like this, with supply chains broken and productivity reduced, the main aim for
all government organizations is the survival of businesses. This was one motive common to
all nations across the world in their economic revival strategy. This was done by injecting
liquidity, relaxing interest rates and the provision of credit in one form or another for the
stability of demand.

The American government injected approximately $2 trillion in the form of repo operations.
China on the other hand rose close to $650 billion on the same front. The United Kingdom
too raised $264 billion through quantitative easing and another $124 billion to go along. The
UK government also made a provision for new loans to the tune of $390 billion. Interest rate
cuts, asset purchases and credit provisions to the public were also among the common relief
measures taken up by various governments. 

India compared to these countries has been spending pennies on relief measures. Their
amount of liquidity injections has been significantly lower than the above-mentioned
countries. Though the amount injected was low there were several policy measures and
targeted credit supply initiatives which made overall economic relief portfolio efficient.
Experts have predicted that the Indian economy is to shrink by 4.5%.
 IMPACTS OF THE PANDEMIC.

One thing predicted by all experts is the behavioural change of consumers due to the
pandemic. Consumers now will be more health conscious, even the small issues like cough
and cold will be taken care of with absolute care and caution.                                                                             
The health sector will witness an immediate boom as awareness regarding health and safety
has been widely advertised, which will lead to increased demand. The pandemic has instilled
a fear among the citizens and now consumers are very careful and have become health
conscious, even more so. This is a positive sign for the healthcare industry. Even the smallest
of infections and colds are treated with care and caution so that this does not aggravate. This
will increase the need for more healthcare professional, more equipment etc.
Social distancing advocated by governments has led to the increased popularity of E-
commerce sites. The population has started finding ways to do what they did by maintaining
the rules and regulations imposed. Their requirements are now fulfilled with a push of a
button. Through this mode of purchase, the basic needs of the people are fulfilled without
endangering health. This mode of purchase is keeping the consumption cycle active even and
the infection count at check. The popularity of online retail is increasing and they are
witnessing an ever-widening consumer base to serve. These lockdowns have forced
consumers to turn to these platforms to satisfy their needs. These use of these platforms have
also promoted a new era of digital transactions and digitization.

Schools, colleges and other educational institutions have started teaching through online
channels increasing the demand for laptops, tablets and cell phones. Alongside it has also
increased the demand for network operators [internet connections]. Other such certification
courses have now been introduced in the online mode and educators who previously tutored
school students now have started their classes on the online front. In essence, this pandemic
has brought about a huge change in the way the education industry works and also promoted
the use of technology among students.

The manufacturing, tourism and the aviation sectors have faced the worst of them all. The
strict lockdowns and curfews imposed have drastically reduced production. The lockdowns
forced
shut industries that resulted in loss of demand and supply at the same time. Even after the
lockdowns have been lifted, firms are not able to perform in the pre-crisis levels due to lack
of demand. But experts believe that temporary reduction in production does not have to
prevail to the same extant, so there is much hope for revival.  

The aviation sector that is already heavily burdened with expensive overheads has been
performing at 1/4 of their capacity. The aviation industry is in a precarious position right
th

now, financially speaking as no one seems to know how long this pandemic will last. The
prolonged existence of this situation can cause many airlines to go bankrupt. Forced mergers
with bigger names in the industry and nationalization of airlines, for survival are very much a
possibility. 

Tourism industry which in the present scenario can be called a null set will take a year maybe
two to come back to its former glory. A lot of countries depend heavily on tourist incomes.
Close to 10% of Thailand’s national revenue comes from the tourism sector. There are many
other countries with one of the largest tourism industries; USA $488 BILLION, CHINA $224
BILLION, GERMANY $130 BILLION. The top 10 countries contributing to the tourism
industry are all advanced economies contributing up to $1.4 trillion.

The entertainment industry too witnessed severe crunch. With all forms of outdoor
entertainment coming to a halt and various events cancelled, this sector too faced the pinch of
the virus but the sector also witnessed a positive impact in this unfortunate circumstance.
With lockdowns and curfews imposed, the digital media and gaming sector witnessed an
accelerated consumption. The gaming industry witness especially witnessed exponential
growth in user penetration and engagement levels. The slowdown caused the print and TV
advertisements to suffer though. In all this industry faced a mixed bag of effects. 

In effect all businesses, be it in any sector has faced some pinch of some kind. But from a
financial standpoint it can be said that businesses facing liquidity issues in the short run will
face solvency issues in the long run. Permanent effects on the macro economy will be
possible and one thing to keep in mind is Longer the Crisis, Longer the Recovery.
 WHAT TO WATCH OUT FOR?

The crisis we are facing today is an unprecedented one. Most of the economic crises that have
occurred in the past have been caused due to the failure of the financial systems. This time it
has been caused due to a health issue. This is uncharted territory. But a thumb rule that seems
to be is the protection of firms from bankruptcy. Too many firms must not be allowed to go
bankrupt as it may cause a cascading effect. This raises the question whether advancing credit
is enough for the survival of businesses during Covid times? 

The precarious financial position of firms can dissuade them to invest leading to lower level
of investments eventually leading to lower levels of growth in the medium to long run.

The current crisis has ignited a series of inward-looking foreign policy which is expected to
flatten the globalization curve. This curve has been dipping since the 2000’s and attributing
its dip solely to this pandemic would be unfair. All this has done was hasten the process.

Work-from-home culture is expected to sit in well after the crisis is over as this move has
proved profitable and efficient in various fields of work like virtual assistants, content
writers, translators, web developers. These are few of the many examples.

Most importantly, the field of virology will and has seen a lot of growth especially the ones
finding a cure for COVID-19. Experts say this may cause a crowding out effect which will
lead to other fields of research losing out on essential funding. Concentrated efforts on only
one aspect of research may hinder future developments.

Jan Egbert Sturm (Dir. KOF Swiss economic institute) says that, “socio-economic changes
are not required right now to overcome systemic changes in the economy. Once we are
relatively out of the crisis such changes must be deliberated.”

He also says it might not be entirely surprising to hear Governments cutting back on
expenditure in the social and innovation aspects as once out of the crisis, it is important for
the state to evaluate to what extent the state has indebted itself. Over leveraged countries may
have to cut back on such expenditure to get their respective economies on track. This shows
the need for prudent economic decisions considering both short as well as long term needs.
 A leveraged economy is one major thing to keep in mind in such a situation. We are
already in an economic crisis and the recovery from such a situation is a hard one but the
recovery becomes significantly harder if an economy is already leveraged. In simpler terms,
spending on relief programmes can put a dent in an economy’s finance and the process of
recovery is a credit-consuming one. If a country spends all of its money on relief measures
then it will have nothing to spend during the recovery period which crucial in the revival
process. Over spending, chokes future cash flows integral to bringing back the economy in
line with its pre-crisis levels.

Economists have outlined the parameters for countries who will face the hardest pinch of the
pandemic. The editor in chief of the Economist has said that the countries who were heavily
indebted before the pandemic hit, emerging economies with lack of funds or dry source,
countries that are highly dependent on tourism are the ones who will face the worst of this
pandemic. FORBES has come up with a list of countries which were hit the hardest in terms
of GDP contraction.

S NO COUNTRY BASE CASE WORST CASE

1 SPAIN -11 -14

2 FRANCE -11 -14

3 ITALY -11 -14

4 UNITED KINGDOM -11 -14

5 CZECH REPUBLIC -10 -13

6 PORTUGAL -9 -11

7 BELGIUM -9 -11

8 ICELAND -10 -11

9 SLOVAK REPUBLIC -9 -11

10 LITHUANIA -8 -10

RECESSION
A recession is a significant decline in economic activity spread across the economy, lasting
more than a few months, normally visible in real GDP, real income, employment, industrial
production, and wholesale-retail sales. A recession begins just after the economy reaches a
peak of activity and ends as the economy reaches its trough. Between trough and peak, the
economy is in an expansion. Expansion is the normal state of the economy; most recessions

are brief and they have been rare in recent decades1.

A steady flow of money, goods, services and the people to make them flow is essential to a
healthy economy. That flow has been severed due to the virus. At this stage of the pandemic,
recession can be considered as an inevitable occurrence with multiple variants. In simpler
words, harder the supply chain is hit more worse the recession gets. According to Bane
consultancy, there are three types of recession.

1. THE ‘V’ CURVE       

This graph represents a one- time dip. If credit can flow, productivity and labour are less
affected. Growth dips but recovers to pre-crisis levels.

1
Definition from Fed Reserve Bank of San Francisco
2. THE ‘U’ CURVE

This graph represents a more costly recession. The credit flow is disrupted; growth drops        
precipitously and never bounces back to its pre-crisis levels though the growth of the
economy recovers. There is always a gap in the growth levels.
3. THE “l” CURVE

This curve represents the worst-case scenario. Credit flow is disrupted, growth plummets
and there is little to no investments. This economy does not recover to its pre crisis levels
and the growth rate also takes a dive.

These scenarios represent various characteristics of a recession. It is difficult to

\
Another cause for concern is the future hiring prospects. THE ECONOMIST, in its article
the 90 percent economy has stated that even after the pandemic blows over, we will not
get back to functioning like the pre-pandemic times. This pandemic would have brought
some changes in the way things are functioning. This can sound like a cause of concern
for newly graduating individuals who are seeking employment. With deficient demand
and disrupted supply chains and credit crunch, everybody is trying to conserve cash as
much as possible so that they can survive this pandemic. This conserve cash mentality
might come in the way of hiring new employees. The pandemic has already brought
about record figures in recession across the globe. Though relief measures have been
introduced in abundance, these measures are only helping keep the numbers from
increasing, they do not provide any ailments.
 THE PANDEMIC AND THE GLOBAL POLITICAL CLIMATE

The pandemic has forced many countries to take towards a more inward-looking foreign
policy. This has flattened the globalisation curve to a great extent and will have negative
impacts on the economic front. The way many countries have responded to this pandemic
will be the deciding factor in the global powerplay hence forward. The USA’s coming out
of WHO and other such unpopular and rash decisions made by the TRUMP
administration has shifted the focus of the international community to China. China has
the ability to take over as the global financial hub but this process has some hindrances
and is a time consuming one too. For example, the dollar took quite a while to beat the
British pound to take over as the global medium for currency exchange. On the other
hand, the Chinese currency is not convertible which significantly undervalues the
currency in the exchange market. Though the Chinese currency is not convertible, the
yuan has a lot of potential to gain supremacy as China has good hols and also projected a
good growth rate in the capital markets. Moreover, the technological background required
for financial transactions and other such financial amenities are already present which
may make it all the more easier for China to take over as the global financial hub. The
USA was expected to be the torch bearer in these hard times but due to negligent
decisions on part of the authorities, the country itself had a large surge of cases. Coupled
with more reckless tactics on the international front, like the blame game played by
authorities of the highest level, fuelled this loss in faith by the global community.
But with a new president in power in the White House and more promising plan of action,
things might just be looking up. The USA has built one of the most sophisticated
economies of scale and with proper direction can gain its place in the global pedestal.
 COMING OF THE VACCINE

On the 9th of November 2020, almost a year into the pandemic, Pfizer and BioNTech gave a
press release stating the arrival of their vaccine against covid 19. This announcement gave a
lot of hope to citizens across the globe. After such a long time into the pandemic the sounds
of hope became ever so ominous. Furthermore, other pharmaceutical companies too are close
to the finishing line which has brought more hope and optimism in the eyes of the population.
Economists are expecting the economic revival to begin very soon and with the current pace
the possibility of achieving pre-crisis levels of growth seems like an absolute possibility.
With favourable government policy structure in place and the establishment of new supply
chains, things have taken a turn for the good.

The vaccine trial conducted by Pfizer had 43,538 participants out of which the company
reported a 90% effectivity rate. The participants were of diverse backgrounds and the vaccine
is already in supply.
 SUGGESTIONS
With the arrival of the vaccine, a thorough study with good facts and figures in our hands,
economists and other authorities in power are getting a grip of the situation in hand. This
situation is an unprecedented one and has helped identify the loopholes in our established
government systems and understand the true nature of the issues at hand. It has tested our
abilities and has helped identify important recovery tools and mechanisms which can help
face future impacts with nonchalance.

In conclusion, I would like to say this COVID-19 crisis is an absolute tragedy and this has
caused a lot of suffering for everyone. In these tough times, hope and faith are two important
things we should never let go. Humanity has been tested time and again and every single time
we have emerged victorious. I do not think this time will be any different. The passion, need
and greed for a better and brighter future will always help us get through bad times. I
personally like to think every obstacle as an opportunity to learn and deflect and eventually
this will lead us to a better path.

With the coming of the vaccine, things seem smoother than before and has had a positive
impact on the global population. A sense of hope can do a great deal of wonders. In an Indian
pretext, out of the many pharmaceutical companies that are on the verge of a breakthrough, 7
of them are Indian companies. With huge governmental support through the scheme AATMA
NIRBHAR BHARAT, a lot of Indian firms have been encouraged to pursue such endeavours
and have emerged successful. With such a push for self-sufficiency and self-reliance by the
government, things seem to take a turn towards a better and independent future.
 CONCLUSION

10 months in and the virus isn’t over yet. Looking at all countries battling the virus one can
confidently sat that the agenda seems to be the same for all but the difference arises in the
spending capacity. Industrial nations have been able to spend close to 20% of their respective
GDP’s on relief measures while emerging nations don’t have the capacity to do so, Brazil
being an exception. India on the other hand has only spent approximately 7-8% of its GDP on
relief measures.

India compared to other nations entered this crisis with a lot of baggage, the baggage being
economic underperformance. Even before the pandemic properly hit India, in the financial
year ending in March, GDP grew at a mere 4.2%. The sequence of quarterly GDP growth
numbers leading up to that point tells a clear story. 7% growth shrunk to 6.2%, then to 5.6%,
5.7%, 4.4% and finally 3.1% in the quarter that ended with the lockdown2. The cause of this
downturn has mainly been attributed to the loss of investments. Investments shrank by 3%.
Not just that the increasing fiscal debt of the government is another cause for worry.
Economists believe that the current government’s thought process that its own spending will
only fuel growth has led to a 12% increase in governmental expenditure. Overburdening the
already high fiscal debt. According to the Economic Times, the government last year had a
4.6% fiscal debt; this is way before the virus hit us. Measures like the GST, IBC, and De-
Monetization are all positive steps for the economy but all of them failed to provide any
incentive for investment growth. The figures tell you the same story as well. According to
Mr. Raghuram Rajan, there have been no strong reformative measures to uplift the economy
rather only distributive ones.

The lockdowns imposed in India, were stringent ones and was a thoroughly underprepared
one too. Migrant labours suffered the brunt of this lack of preparation. With the lockdown
imposed and everything shut, these migrant labourers were stranded in the middle of
nowhere. With no money and no home, they were left bereft by the government. With no
means to reach their hometowns as transportation came to a standstill they were left to their
own fates. It was later that special transportation was arranged by the government under the
VANDE BHARATH scheme where Indians stranded within and outside the country were
brought back home. We can sum this up and comfortably say that India was absolutely not

2
Figures in this page are all taken from ET Times
prepared for such a crisis and has it worse than many other nations. It currently holds the
second position in the world for the number of infections.