Economic Impact of Lockdown: A Study from an Indian Trader’s Perspective

International Journal of Business Management and Research(IJBMR) ISSN(P): 2249–6920; ISSN(E): 2249–8036 Vol. 10, Issue 3, Jun 2020, 1–6 © TJPRC Pvt. Ltd.

ECONOMIC IMPACT OF LOCKDOWN: A STUDY FROM AN INDIAN TRADER’S PERSPECTIVE Dr. RAGHU G ANAND Associate Professor and Head of the Department-Dual Programs, Jain – Deemed to be UniversityCenter for Management studies, Bangalore, Karnataka, India ABSTRACT Trade is the backbone of any economy. A proper supply chain system in place ensures the demand is met and it creates different utilities. When this system develops a glitch on account of any reason, be it micro or macro, it will have a negative impact on the economy as a whole. Further, almost all nations of the world are dependent on each other for various goods and services. Every country would want to increase its exports and create a good amount of foreign exchange reserves. COVID 19 has brought the world to a standstill with the lockdown period, increasing in terms of number of days. Such lockdowns will put the country’s entire economic activities into jeopardy. This research intends to give a brief on the current crisis that India’s trading community is going through and provides a researcher’s perspective of the impact it would have in future on the same.

Original Article

KEYWORDS: COVID 19, Lockdown, Trade, Economy, Business, Economic Impact & Retailer

Received: Mar 17, 2020; Accepted: Apr 07, 2020; Published: Apr 22, 2020; Paper Id.: IJBMRJUN20201

INTRODUCTION Trade and Economy Trade refers to the buying and/or selling of goods with an intention of making profit. This is done for a price or consideration. Trading could be bound either to the domestic market i.e. domestic trade or can be done across borders i.e. international trade. Some characteristics of trade are: 

It enables products or services to reach any part of the world, particularly after globalization, thus contributing to the national income.

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It promotes economic, political and social relations among the trading nations, resulting in peace, harmony and exchange of technology and ideas among nations.

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Employment and improved standard of living can be achieved through trade.

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Mass production, tapping of profitable markets, overseas trade leading to luring a trader with better margins, is possible through trade.

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Indian Economy and Trade Like any other economy, Indian economy too depends on its trade, particularly export trade of both agricultural produce and manufactured goods and services. With newer dimensions like “Make in India”, the production has received a boost and exports being encouraged. Every business and every trade, regardless of their size and operations, contribute towards the income of the nation.

Exports of products lead to: 

Surplus production, of products like tea, jute, spices, etc, which have a huge demand not just in the domestic market but also internationally.

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Foreign exchange, that is essential for the imports of the country.

The report of IMF, on a per capita income basis indicates that India exported $330 billion in 2018-2019, that

included Agricultural products to the extent of 12.8%, Fuels and mining products 13.8%, Manufacturers 70.5% and others 2.9%. In this regard, India was ranked 139th by GDP and 118th by GDP (PPP) in the year 2018.

Trade and distribution channels are interlinked, it is between these channels that the manufacturers, intermediaries and customers get connected and derive the benefit of product or service.

Manufacturer------>Distributor-----Wholesaler-----Retailer/Service Provider-----Customer All these channels work for certain margins and an issue with any one will have a cascading effect.

COVID 19 Corona virus disease, also known as 2019-nCov or 2019 novel coronavirus is an infectious disease that causes respiratory illness and it primarily spreads through contact with the infected person through cough or sneeze. It may also spread when a person touches a surface or object that contains the virus and then comes in contact with his eyes, nose or mouth immediately. WHO has declared this as pandemic. It has led to the entire world locking down it-self and people quarantining themselves.

In India, the virus became prominent after Feb 2020. With the recommendations of the WHO, the Indian Government declared complete lockdown of the entire country, except essential services like Police, Water, Electricity and ensuring smooth supply of grocery, milk and medicines. Barring these, all other markets have been shut for almost a month now and needless to mention that they are affected.

Impact of COVID19 and Lockdown on Trade in India Once a cure is found out in eradicating or controlling corona virus, the impact on the businesses could be assessed. 

It is estimated that because of lockdown the country’s growth could come down from 4.5% to 2.5%.

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As per FITCH ratings India’s GDP growth in 2021 could be 2%, the slowest since liberalization.

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Asian Development Bank has predicted that India’s economic growth could be 4% in 2020-21

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Standard & Poor has predicted that the GDP growth of the country would go down to 3.5% in 2021 from a previous prediction of 5.2%

Impact Factor (JCC): 8.2193

NAAS Rating: 3.43

Economic Impact of Lockdown: A Study from an Indian Trader’s Perspective

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Moody’s investor service estimates India’s GDP growth during 2020-21 as 2.5% from an earlier prediction of 5.3% All these predictions are due to the pandemic that has adversely affected the economy. Migrant workers who have

started returning home may or may not return to their work base once everything is settled. There has been unrest and some communities have started barricading themselves against the outsiders. 

Durable and semi-durable goods account for only around 11% of the final consumption, whereas non-durable goods account for around 39% and more than three-fourths of this will be adversely affected because of lockdown.

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Services account almost half of consumption. Some service segments like cinema, restaurants, beauty parlors etc. could witness heavy losses in the next few quarters.

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Post COVID-19, consumers may postpone the purchase of durables for home, while coming in terms with pay cuts/downward revision of pay etc.

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An average consumer will also not demand services like air travel, foreign travel, resorts, lodging, culture, recreation etc.

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Fall in consumption and demand will cause a loss of at least 13 Billion USD.

FINDINGS AND CONCLUSIONS It is certain that lockdown on account of Covid 19 will result in economic slowdown and will mean losses and confusion beyond imagination for most of the traders. My research and electronic interaction with the respondents has paved way for the following findings and conclusion: 

Suspension of trading activities, lack of cash availability, restriction on movement of men and materials is like a death sentence served on the livelihood of the traders. While the government has advised the traders to pay salaries to their staff, it can be understood that there is no escape route from incurring the fixed expenses like rent, salary and other administration expenses.

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Sealing of borders both international and inter-state will surely affect the supply chain distribution, relating to cross border trading.

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The imported goods that have landed at Indian ports are lying there because of lockdown. This results in increased cost of parking and storage besides the risk of wastage, theft.

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With the Indian traders unable to provide delivery and making payments on time, there is a threat of the business being blacklisted.

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The ongoing lockdown period has already caused job losses in sectors like travel and tourism, hospitality etc. It is evident that lockdown and job losses are directly proportional.

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With the upcoming recession, it is obvious that things may get worse.

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With the businesses getting affected, loan recoveries for the bankers will be a bigger challenge, which could result

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in NPA spiked up. 

Investors may lose in the short run in the capital markets.

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Fruit and vegetable export is surely going to be hit. As this is the grapes and mango season, a large part of the produce caters to the export market. This will see a downfall due to Covid 19. Farmers have already started disposing their produce as waste, as they are unable to find markets and also support price.

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With factories shutting down, the real manufacturing gross value added will show a decline.

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With no clear sight of recovery, all businesses must prepare themselves for lower revenues, higher costs and lesser cash flows.

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If the situation, which is already sensitive and fragile, is not handled well, the economy will have to pay a bigger price in terms of lesser growth rate, reduced national income and GDP, increased unemployment etc.

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Education sector both primary and higher will suffer losses as it may fall short of students. For the purpose of graduate education and beyond, the students tend to move to a bigger city or a different country. This will be affected as the cost involved is higher and parents will be reluctant to send their wards.

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Businesses in the field of information technology might see an upward trend with the concept of work from home, virtual meetings and classrooms, flexi timings becoming a regular feature.

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Trimmed down salaries results in lesser savings and investments.

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Bankers will find it challenging to finance homes, cars etc.

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https://m.economictimes.com/news/economy/indicators/indian-economy-may-be-set-for-the-road-to-recovery-in2020/articleshow/74311694.cms

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Impact Factor (JCC): 8.2193

NAAS Rating: 3.43

Economic Impact of Lockdown: A Study from an Indian Trader’s Perspective

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10. Adnan Dawood M. Al-Edary & Wisam Neamah Jaafar, “The Impact FDI on Economics and Social Indictors in Pakistan Country”, International Journal of Business and General Management (IJBGM), Vol. 5, Issue 2, pp. 61-76 11. https://www.businesstoday.in/current/economy-politics/post-lockdown-recovery-will-be-slow-demand-low-dcm-chairmanajay-shriram/story/400031.html 12. https://www.businesstoday.in/current/economy-politics/coronavirus-effect-adb-pegs-india-growth-rate-4fy21/story/400029.html 13. Nchumthung Murry & R. Nakhro, “Perception on Socio Economic Impact of Self Help Group Participation by Tribal Women in Nagaland”, International Journal of Educational Science and Research (IJESR), Vol. 9, Issue 6, pp. 11–16 14. https://www.businesstoday.in/current/economy-politics/coronavirus-centre-asks-states-to-ensure-smooth-disbursement-of-pmgky-funds/story/400028.html 15. Sudeep Solanki, “Impact on Socio-economic Status after Induction of Improved Goat Farming Practices among Tribals of Abu Road, Rajasthan”, International Journal of Agricultural Science and Research (IJASR), Vol. 7, Issue 6, pp. 437-442 16. https://www.businesstoday.in/current/economy-politics 17. www.internationalecon.com

AUTHOR PROFILE

Dr. Raghu G Anand received his B.Com degree in Accounting and Taxation from MES College, Bangalore University in 1993, the M.Com degree in Costing and Taxation from Bangalore University in 1995, and the Ph.D. in Computerization of SME and the challenges in the dynamic scenario, from Golden State University UK/USA in 2005. He is the head of value addition department of Jain University – Center for Management Studies, Bangalore, where he is the interface for several international/chartered programs. He is a chartered member of Chartered Institute of securities and Investments, London and Fellow, Chartered Financial Practitioner, Singapore. His research interests include computerization of accounting, challenges faced, SAP and IFRS, stock and commodity markets.

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