COVID-19: Indian Economy in Critical Care
It is over five months since the world has been fighting against COVID-19. It is certain that due to novel coronavirus the uncertainties are going to increase, and world is changing like never before. With several lockdowns, death toll on an increase and millions of them losing jobs, the global economy has already started to suffer. It is believed that the catastrophe will be much higher than the Great Depression. Thus, in this article, we shall focus on how COVID-19 has terrorized the Indian markets.
The question which lingers in everybody’s mind is “will things go back to normal? Will we see normal days?”. While I believe that the world will go back to normalcy, but it is just that the definition of normal is going to change. The upcoming months in India are going to be terrifying as several industries and business have already seen a significant impact and continue to see the changes.
“World Bank has sharply scaled down its projections for India’s economy, forecasting 3.2% contraction in the fiscal year 2020-21 because of the Covid-induced lockdown.”
Highly affected Sectors: -
Following are the few sectors, I believe are going to be highly affected: -
· Aviation & Tourism: -
The government suspended over 600 international & domestic flights for a period of 3 months. For at least a year, it is unlikely that people will travel unless out of dire necessity. Domestic travel though having been resumed are still not in full operative mode. Due to the fear of COVID-19, most of these airlines have not seen much of travel activities and in fact there has been a major drop in airline fares. Even the popular routes do not see heavy traffic. Private airport operators have requested the Government to grant permission to impose a nominal passenger facilitation charge on airfares to cover the increased operating cost. India has been a country of heritage sites and has always attracted global tourists. But due to the suspension of visas, tourist attractions have been shut. The entire tourism chain from hotels, restaurants to visitor’s fee and operators have been affected brutally. Tourism industry is going to face a massive challenge in recovering.
· Automobiles & Electronics: -
Due to recession and lack of demand, automobiles industry will continue to face challenge. Nearly 55% of electronics imported by India originate from China. These imports have already lowered to 40% and is bound to reduce further due to the rise of COVID cases. Also, China has been one of the largest importers for automobiles, electronics and raw materials and due to the lockdown and political differences, it is likely that India is going to face trade difficulties.
· Pharmaceuticals: -
India is one of the largest suppliers for generic drugs. But the pharma industry is heavily dependent on China for Active Pharma Ingredients (APIs). Majority of these Chinese manufacturers are located near Wuhan, the epicenter of the COVID outbreak and thus major disruption has started to occur. The Indian API manufacturers have increase their price, where on an average the prices have increased 10-15% and in some cases the increase has been more than 50%. Such price increase will affect the Indian pharma industry such that there might be shortage of generic drugs which are highly dependent on APIs.
Government solutions: -
Indian government has taken various measurements to curb the hit. It is a different story that how much these measurements shall come as an aid: -
· For delayed payments of advanced tax, self-assessment tax, regular tax, TDS, TCS, equalization levy, STT, CTT made between 20.03.2020 and 30.06.2020, reduced interest rate at 9% instead of 12 %/18 % per annum (i.e. 0.75% per month instead of 1/1.5 percent per month) will be charged for this period. No late fee/penalty shall be charged for delay relating to this period.
· Relaxations have been provided for 3 months to the debit cardholders to withdraw cash for free from any other banks' ATM for 3 months, along with waiver of minimum balance fee, reduced bank charges for digital trade transactions for all trade finance consumers.
· No additional fees shall be charged for late filing during a moratorium period from 01.04.2020 to 30.09.2020, in respect of any document, return, statement etc., required to be filed in the MCA-21 Registry, irrespective of its due date.
· The mandatory requirement of holding meetings of the Board of the companies within prescribed interval provided in the Companies Act, 2013, (120 days) shall be extended by a period of 60 days till next two quarters i.e., till 30.09.2020.
· Due to the emerging financial distress faced by most companies on account of the large-scale economic distress caused by COVID 19, it has been decided to raise the threshold of default under section 4 of the IBC 2016 to Rs 1 crore from the existing threshold of Rs 1 lakh.
· Government, announced a Rs 1.7 lakh crore relief package aimed at providing a safety net for those hit the hardest by the Covid-19 lockdown, along with insurance cover for frontline medical personnel. About 800 million people are expected to get free cereals and cooking gas apart from cash through direct transfers for three months.
· Government approved a COVID-19 package worth Rs 15,000 crore to build on health infrastructure till March 2024, to be given to state governments and Union Territories to develop COVID-19 hospitals, purchase of personal protective equipment, setting up of laboratories, procurement of essential medical supplies, medicines and consumables, and for strengthening health systems.
Currently, the global focus is towards creating a vaccine, but the government should work the economy damage control. Government needs to brace themselves because it is highly possible for GDP to further fall. The entire nation is in a vulnerable condition since we have already started ailing. The nation needs, more than ever, concrete plans to work in the favor of the economy. and work towards making things right.
 Dhasamana, Indivjal, “Covid-19 impact: India's economy to shrink by 3.2% in FY21, says World Bank”, available at https://www.business-standard.com/article/economy-policy/covid-19-impact-world-bank-sees-india-s-economy- shrinking-by-3-2-in-fy21-120060801688_1.html.  Rastogi, Siddhartha, “The New Normal: Analysis of COVID-19 Impact on the Indian Economy”, available at https://blog.smallcase.com/the-new-normal-analysis-of-covid-19-on-indian-businesses-sectors-and-the-economy/.  Muthukrishnan, Manjula, “Covid-19 and its impact on Indian Economy”, available at https://bfsi.eletsonline.com /covid-19-and-its-impact-on-indian-economy/.  Ibid.  Televisory, “China’s virus ails the Indian pharmaceutical industry”, available at https://www.televis ory.com/blogs/- /blogs/china-s-virus-ails-the-indian-pharmaceutical-industry.  Gupta, Achal., “Coronavirus (COVID-19) And Indian Economy”, available at https://www.mondaq.com/indi a/operational-impacts-and-strategy/936014/coronavirus-covid-19-and-indian-economy.  Ibid.  Supra note 6.  Supra note 6.  Suri, Ishwinder. “Impact of COVID-19 on Indian Economy and Road Ahead for Corporate Sector”, available at http://bwdisrupt.businessworld.in/article/Impact-of-COVID-19-on-Indian-Economy-and-Road-Ahead-for- Corporate-Sector-/30-04-2020-190322/  Ibid.  Supra note 10.
Author: Prachi Shah (LL.M., The George Washington University Law School)