Saturday, April 13

COVID-19 AND INDIAN ECONOMY: Impact on Growth, Manufacturing, Trade and MSME sector

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By Pravakar Sahoo & Ashwani Bishnoi

Working Paper No- 390

We make a preliminary assessment of Covid-19 on Indian economy by analyzing its impact on growth, manufacturing, trade and MSME sector. The impact of the Pandemic across sectors and in different scenarios of complete, extended and partial lockdown and at different levels of capacity utilisation is massive on the Indian economy. India’s economy may barely manage to have a positive growth of half a percent in an optimistic scenario but also faces the possibility of a 3 to 7 percent negative growth in worst case scenarios for the calendar year 2020. The impact is severe on trade, manufacturing and MSME sectors. The likely impact (deceleration) of Covid-19 from best case scenario to worst scenario are follows – manufacturing sector may shrink from 5.5 to 20 percent, exports from 13.7 to 20.8 percent; imports from 17.3 to 25 percent and MSME NVA from 2.1 to 5.7 percent in 2020 over previous year. The economy is heading towards a recession and the situation demands systematic, well targeted and aggressive fiscal-monetary stimulus measures.

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