Two types of impact

• Primary Impact – related to restrictions imposed and social distancing, especially on urban economy and service sectors (both formal and informal), tourism and travel, retail, transport and real estate.

• Second round effect – result of primary impact- Reduced income, reduced consumption Expenditure (thus reduced expenditure multiplier), NPA among MSME, outflows of FPI.

Oil and natural gas

• Due to the fall in travel, global industrial activity has been affected. Oil prices fell further in March as the transportation section, which accounts for 60 per cent of the oil demand, was hit due to several countries imposing lockdowns.

• Not only oil, early this year in China, due to Covid-19-related containment measures, the demand for natural gas fell, as a result of which many Chinese LNG buyers halted their imports as storage tanks filled.

Industrial Metals

• Due to lockdowns in China, followed by in the US and Europe, the demand for industrial metals reduced as factories shut down. As per IMF, China accounts for roughly half of the global demand for industrial metals.

Food and beverages

• IMF projects a decrease in food prices by 2.6 per cent in 2020, caused by supply chain disruptions, border delays, food security concerns in regions affected by Covid-19 and export restrictions.

• In the lockdown period, while the price of cereals, oranges, seafood and arabica coffee has increased, prices of tea, meat, wool and cotton have declined. Further, the decline in oil prices has put a downward pressure on the prices for palm oil, soy oil, sugar and corn.

Malnutrition

• loss of wages means decreasing income of migrant population (which happen to come majorly from eastern India). This will reduce Consumption Expenditure by households.

• As per NSSO CES data 2011, 45% of expenditure of Indian household and 60% of expenditure of Poor household goes on Food items. Thus, this will result into malnutrition and hunger deaths

Banking Sector

• Disparity in Credit giving- Banks are ready to lend to big corporates, who are now not taking up loans as they obtained their full capacity. While small firms who are in more need of loans are not getting loans as banks as sceptic about their credit worthiness

MSME Sector

• Most of them are not registered anywhere due to informal nature. This apparent Invisibility constraints govt's ability to help them. Developed countries are providing wage subsidy and extra credit to smaller firms and they are able to reach this sector due to registration. This makes Indian MSME sector more vulnerable.

Agriculture Sector

• On food production and distribution- farmers are compelled to hold the produce perishable in nature lead to various impacts like farmer stress, decline in quality and cost of produce etc.

Other Issues

• Ability to retain prolonged closure due to lack of buffer, ability to restart the production after lockdown, drain of migrant labours.

Data/Surveys related issues

HOW PANDEMIC COULD IMPACT VARIOUS SECTORS| GS ARTICLES

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