The study aims to make an assessment of COVID-19 on Indian economy by analysing its impact on growth, manufacturing, trade and micro, small and medium enterprises (MSME) sector, and highlights key policy measures to control the possible fallout in the economy. The impact of the pandemic across sectors and in different scenarios of complete, extended and partial lockdown, and at different levels of capacity utilization is massive on the Indian economy. India’s economy may barely manage to have a positive growth of 0.5 per cent in an optimistic scenario but also faces the possibility of a 3–7 per cent 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 as follows: manufacturing sector may shrink from 5.5 to 20 per cent, exports from 13.7 to 20.8 per cent, imports from 17.3 to 25 per cent and MSME net value added (NVA) from 2.1 to 5.7 per cent 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.
India's prowess in the service sector has been recognised the world over. Sustaining services exports is important not only to sustain India's high growth rate but also to compensate for a consistent deficit in merchandise trade and to maintain stability on the external sector. In this context, we analyse the factors of India's performance in services exports over the past three decades. The results reveal that endowment factors such as human capital, improvement in physical infrastructure and financial development are key drivers for India's surge in services exports along with world demand, exchange rate and manufacturing exports. While factors such as institutions, R&D expenditure, telecommunication, foreign direct investment and financial development significantly impact the export of modern services, traditional services exports are more dependent on infrastructure development, manufacturing exports, world demand and exchange rate. India's economic reforms in the financial sector, FDI, communication so far have helped the services exports, but India needs to focus on supply‐side factors to improve the competitiveness – and thereby volume – of services exports.
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