Impact of Covid 19 on Indian Manufacturing Sector: An Analytical Study

Abstract

First case of novel coronavirus SARS-CoV-2 (Severe Acute Respiratory Syndrome Coronavirus-2) infection was reported in Wuhan China in December 2019. The world Health Organisation declared it a global pandemic in January 2020. So far, the disease, termed as Coronavirus Disease-19 or COVID-19, has killed over 52 lakh people all over the world, out of which 4.5 lakh were from India. 

Covid-19 forced governments to impose lockdown to stop spreading of the infection. In India, Prime Minister announced nationwide lockdown on 24 March 2020, during which, except emergency services, no other service was allowed. Lockdown was increased from time to time and later opened on June 2020. During the lockdown, all the manufacturing work, except essential services, was on standstill. It has a highly negative impact on the global economy. India suffered heavily as Indian economy was not performing well before the announcement of lockdown, and covid-19 increased its miseries. Also, Indian manufacturing sector was in trouble after the Financial Year (FY) 2016-17. It tried to revive when finally lockdown was eased up. However, second wave of covid, between February 2021 and April 202, again broke its momentum. During the lockdown lakhs of migrant labourers were forced to take journey on foot towards their villages and towns from the big cities. During the exodus of labourers, many lost their lives because of trauma caused by hunger and fatigue. India was relatively safe during the first phase of covid-19. However, second phase was devastating. Lakhs of people lost their life during this phase.

Industries faced various problems viz. halting of operations, unavailability of labourers due to migration of labourers, unavailability of raw material and transportation of finished goods due to disruption of supply chain, increasing operational cost, inability to pay to creditors due to non-availability of funds, deterioration of machinery on account of non-maintenance of machines during the and after the lockdown. Lockdowns had adverse effects on labour markets, production supply chains, financial markets, and other vital activities of industries. Around 23 crore Indians have been pushed into poverty during the past one year.  To revive the economy, central government announced ₹20 lakh crore bailout package to industries and businesses. It announced more packages later. However, despite of these packages, Indian economy suffered heavily. There had been -7.1 percent growth of GDP for the Financial Year (FY) 2020-21. Share of manufacturing in Indian economy has decreased over past years. It is also failing to create enough jobs. In fact, its share in job creation has also reduced compared to agriculture sector. MSMEs suffered heavily during and after lockdown. Many units closed their business as they had no resources to run their business. Cash crunch, disruption in supply chain, unavailability of raw material, exodus of labourer, covid restrictions, decreased demand etc. hampered growth of MSMEs.

Hence, covid-19 has a devastating impact on Indian economy, manufacturing sector and society. We need to analyse its impact so that we may find the way to mitigate its impact and make effective strategy to tackle problems that may arise in future. Government needs to take various steps like providing funds to industries, reduce tax rates, provide support to labour intensive industries, simplify rules and regulations, etc. Businesses need to work on supply chain management, better planning, etc. to be prepared for such an unforeseen events in the future.