The world faced one of its worst crisis when the novel Coronavirus or Covid-19 pandemic broke out. The pandemic represented one of the biggest threat to the lives and economies of our entire planet in recent past. In this article, we will have a look at what the economic impacts would be if the country reaches its target of 100% COVID vaccination. The virus has and still is reshaping societies and economies and has significantly changed the cycle of our daily life.
Modifications in our social behaviour can already be seen in the way people interact, the hybrid culture of our work and much more. One of the biggest reliefs in the last 1 year has been the roll out of the vaccine. But the biggest question that remains is will the vaccine help our economy just as it helps us? Keep reading the article to know the answers!
How did Coronavirus Affect the Indian Economy?
With the rising number of cases, India had to follow strict measures had to be adapted. On March 24, 2020, Prime Minister Narendra Modi called for a complete lockdown of India for 21 days in an effort to contain the COVID-19 pandemic. This decision left thousands of people clueless, creating chaos nationwide. The GDP had contracted 24.4% in the April to June 2020 quarter, followed by a 7.4% shrinkage in the second quarter.
Coupled with the humanitarian crisis and silent treatment of the government, the covid-19 has exposed and worsened existing inequalities in the Indian economy. The unemployment rate rose to 12%. As of 27 September 2021, according to official figures, India has the second-highest number of confirmed cases in the world after the United States of America.
How did the Vaccination Drive Help the Economy?
On 21 October, In his address to the nation, Prime Minister Narendra Modi hailed India’s vaccination drive on the occasion of the country crossing the landmark 100-crore shots in nine months. India is now the second country to achieve one billion doses globally after China.
With over 75% of adults administered at least one dose and 30% fully vaccinated, people have begun venturing out. This has led to a shift from online to offline, thanks to unlocking in different regions of the country, which is driving up business for restaurants, shopping centers and marketplaces. Key macroeconomic indicators are fast moving into green resulting in growth estimates for different sectors and the economy as a whole.
The Indian economy is now bouncing back from the lows of last year, which were a result of the COVID-induced lockdown throughout the nation. The successful vaccination drive has been the booster shot for India’s economy. The optimism among people further attracted higher investments. This development led to an increase in the rate of employment and overall, a possible brighter future.
India’s growth in the fourth quarter of the fiscal year 2020 had earlier fallen to 3.1% according to the Ministry of Statistics. That is when the government infused ₹900 crores into the Department of Biotechnology in November 2020 to aid the development of a COVID vaccine. The 2021 budget of India also allocated ₹35,000 crores for vaccine procurement.
With the increase in demand, manufacturers and suppliers further increased their supply. As the vaccine drives further incraesd throughout the country social distancing norms, were further liberalised. This in turn allowed workspaces like factories will to work in their full capacity. Good news for the unemployed workers as the chances of laid-off workers getting re-hired will now increase.
How are the Sectors in India Performing Post the Vaccine?
The first quarter of FY 2021-22, despite being affected by the Second Wave of COVID-19, saw a Gross Value Added (GVA) expansion of 18.8 per cent (at constant prices) as against a decline in the first quarter of last year. The GVA data is crucial to understand how the various sectors of the economy are performing.
Agriculture Sector in India
The sector that kept the entire economy going when the country was severely hit by the pandemic was the Agricultural sector. “Today, food grains are being procured at a record level. The money is going directly into the bank account of the farmers,” said PM Modi.
Banking Sector in India
Another sector that showed surprising development during the crisis was the banking sector! The banking sector came out of a huge Non-Performing Assets (NPA) crisis. An NPA is a loan or advance for which the principal or interest payment remained overdue for 90 days or more.
Gross NPAs have reduced from 15 percent of the total lending in 2018 to around 7 per cent today. The recent record profits by the private banks show the banking sector has fully healed. Majority of the public sector banks come out of the Prompt Corrective Action (PCA) framework- which is the central bank’s watchlist of weak banks.
Driven by a low-interest rate which is near 6.5 per cent, the housing loan sector has seen a huge surge. There were sizable registrations for new houses in major markets like Mumbai and other cities. The need to isolate, upon contracting the virus, has pushed the middle class and lower-middle-class families to realise that they need bigger homes.
Real Estate in India
Another major driver of the Indian economy, the real estate sector has bounced back too. Because of the housing sales, debts are being repaid and balance sheets of companies in this sector are looking fairly healthy. New projects have also been kicked off, which is a positive sign.
The government has substantially increased its allocation for the development of infrastructure. With an allocation of Rs 5.9 lakh crore, an all-time high, many pending infrastructure projects are getting completed and people are beginning to enjoy their benefits.
Tourism Sector in India
The tourism sector is inching its way back to recovery as Indian travellers are looking for quick domestic getaways through road trips, weekend breaks and staycations. They are now choosing sustainable travel and making environment-friendly choices, a new trend that is seen among travellers. Post-pandemic the tourism sector is expected to grow by 6.7% to reach Rs 35 trillion.
Pharma Industry in India
The Indian pharmaceutical sector was relatively limited in FY2021. The revenue growth for the sample of 21 companies remained muted at 5.8% in FY2021, despite Covid-19 related disruptions, as per a report published by the Investment Information and Credit Rating Agency of India Limited (ICRA).
The recent introduction of the Production-linked Incentive (PLI) schemes and promotion of bulk drugs park will benefit the Pharma companies by reducing dependence on imports of critical input materials and improving their exports of value-added products such as biosimilars, complex generics, etc.
IT Sector in India
The IT sector has outperformed all other sectors with double-digit growth in the second quarter. There has been a revolutionary shift from on-premises hardware to cloud computing. Flexible and remotely working from the comfort of home is the new normal for all IT employees.
Artificial intelligence (AI) and Robotic Process Automation have started to work their way into businesses. The top five companies have hired nearly 100,000 people in the first six months of the year. The IT industry is projected to reach US$ 100 Billion by 2025.
Closing Thoughts on 100% COVID Vaccination
With slightly over 30 percent of the population being vaccinated, the recovery seems to be more than satisfactory. One can only imagine the rate at which the economy will grow once the entire population of the country is fully vaccinated. We can expect policymakers to announce additional reform measures, which may inspire confidence in both domestic and foreign investors.
With a pick-up in consumption demand and matching investment by industry, the growing pace of vaccination will act as a booster for the confidence of the nation as a whole. Until then, Vaccinate yourself, if not done already and Stay Safe! Happy Reading!
That’s all for this post “Will 100% COVID Vaccination Help the Indian Economy?”. Let us know what you think about the 100% COVID Vaccination in the comments below. Happy Investing!