Impact of Covid-19 Pandemic On Interstate Trade
B.COM.LL.B. (HONS.), Taxation Law, Batch-1
Semester - 9
Covid-19 has affected our world in a way it has never been earlier. The only way for a human being to protect himself from covid-19 attack is through maintaining social distance from other human being who is infected from covid-19. It is not possible to trace normally who is infected, only a covid-19 test can determine whether the person is infected or not. Therefore, for an individual in order to prevent himself from covid-19, he needs to maintain social distancing from other human beings, as anyone around can be infected. For maintaining this social distancing Government of India had announced complete national lockdown in India on 22nd March, 2020, closing all the activities in India except certain very essential activities and no one was allowed to move out of their homes. More and more work from home was promoted wherever possible. All the businesses were shut down except for the one operating online and hence huge loss was suffered by all the companies and as a result economy also degraded.
With COVID-19 coming into the picture, the Indian economy is going through a main slowdown, which was obvious over the recent quarters even beforehand the crisis hit. In the third quarter of the present financial year, the economy raised at a six-year low rate of 4.7%. With all these difficulties hitting the world of work from numerous directions, companies are finding it problematic to endure in this situation. They are required to take harsh choices such as cutting down the salaries, giving pink slips to employees and opting for other cost-cutting actions. The epidemic has presented new barriers for the Indian workforce and mainly for the daily wage and contractual labors.
There was a great challenge in front of the government to boost up the economy. Only way to come out of this was through unlocking, but there was huge risk in that as it may lead to rise in number of covid-19 cases. So, to prevent the rise of cases and to unlock the country government launched various awareness campaigns and asked people to be cautious about covid-19. The government then unlocked Country in various phases. In First phase movement of people were restricted to their home districts. In Second phase people can move freely in their state and then now later the country is completely unlocked. The Country was unlocked but government could not control rise in number of cases.
During the lockdown since no movement was allowed interstate and even inter district within the state, it has caused huge loss to the interstate trade. So, researchers with this research paper aims to explore what is the impact of covid-19 on interstate trade and what is the current situation?
SLOWDOWN IN DEMAND & SUPPLY
Coronavirus has disturbed the demand and supply chain across the nation and with this disturbance, it can be seen that the tourism, hospitality, and aviation regions are among the poorest affected sectors that are facing the maximum influence of the existing crisis. Swiggy which is one of the leading food ordering and delivery platforms announced that it is laying off 350 employees as part of the realignment exercise it started in May on account of the impact of COVID-19 pandemic. Visas of all the foreign national were cancelled who were coming to India from Corona Virus hit nations. “Make my Trip” which is India’s one of the leading tourism company stated that the COVID-19 pandemic has resulted in significant weakness in the macroeconomic environment and heightened volatility in financial markets. Their financial and operating results for the fourth quarter of the fiscal 2020 year were impacted by these conditions in the domestic and global economy and the travel industry, with the impact worsening toward the end of the quarter as India was put under lockdown with effect from March 25, 2020. Accordingly, their fiscal 2020 fourth quarter financial results reflect decreases in revenue in air ticketing and hotels and packages segments and a slowdown in bus ticketing revenue growth.
Closing of cinema theatres and decreasing footfall in shopping complexes has affected the trade sector by impacting the intake of both important and optional items. As the intake of any product or services goes down, it leads to an influence on the workforce. In the present situation, with all the retailers closing down their facilities, the jobs of the workforces are at a huge risk.
Air India Ltd. which is one of the India’s Leading airlines companies has registered the loss of Rs. 2,570 Crore in quarter 1 of 2020-21 as compared to net loss of Rs. 785 Crore sustained in a corresponding period a year ago. This is a shocking fall in the performance of the company as it was the period before the lockdown was implemented. But this may be due to the fact that other countries were already having lockdown due to covid-19 pandemic. In India lockdown was implemented little late but in accordance with country’ requirement.
The financial market has practiced ambiguity about the future course and consequences of COVID-19. A projected Rs 10 Lakh Crore of market cap was reportedly wiped off due to the fall of Sensex in another week of March 2020. The fall has sustained till date as investors resorted to persistent selling amid increasing cases of coronavirus.
Conferring to a survey by the Federation of Indian Chambers of Commerce & Industry (FICCI), the instant impact of COVID-19 discloses that besides the straight impact on demand and supply of goods and services, trades are also facing reduced cash flows due to slowing economic activity which in turn is having an influence on all payments including to those for workers, interest, loan repayments and taxes.
Demand and Supply has been decreased in every sector and the reason is covid-19 pandemic has changed the lifestyle of people. People are now mostly spending on the things which are very essential to them. Moreover, Precautionary measures taken by them against the covid-19 are not allowing them to purchase various products which are not essential to them. People are avoiding going to the restaurant, they have fear that they may come in contact with covid-19. People now come with an alternative to cook the same food at home to ensure safety. Likewise there are many other changes which can be seen during covid-19 which have impacted the businesses.
DAIRY CHALLENGES IN COVID
Dairy companies are facing related challenges in supply of milk and other dairy products, with numerous smaller vans getting stopped by police. Milk in tetra packs is sold out in numerous markets. India’s largest dairy firm Amul’s the company is occupied with the authorities to sort out the issues.
Gaining of the lockdown statements by many states, ecommerce saw sharp spike in orders but started facing logistical problems in meeting the unexpected flow in demand. Such platforms witnessed huge increase in absence among the on-ground staff, as high as 75-80% for some large retailers. Workers were unable to come to work due to transport problems.
But in this situation also “Mother Dairy”, a leading milk supplier in India came up with the innovative idea of selling butterscotch flavored “haldi milk” which helps in boosting immunity. This business worked quite well when all the other of its business like ice creams which makes its major profit was not going well.
IMPACT ON E-COMMERCE
Barriers at state borders led to new supplies being cut off and enormous delays in deliveries to consumers. Warehouses of ecommerce companies have been shut and even logistics providers like Delivery, Amazon and Flipkart have stopped offering their services to their sellers.
Furthermore, Flipkart has stopped taking any orders till there is clarity from the local authorities,
Online food delivery startups Swiggy and Zomato are functioning with very few restaurants available on their platforms. Many customers reported that police stopped delivery agents and asked them to return. Swiggy which is one of the leading food ordering and delivery platforms announced that it is laying off 350 employees as part of the realignment exercise on account of the impact of COVID-19 pandemic.
E-Grocer Big Basket has postponed processes temporarily in Mumbai and Delhi-NCR. The company said local authorities have compulsory restrictions on movement of goods despite clear guidelines from the Centre on allowing essential services.
IMPACT ON STATE GOVERNMENTS
State governments rely for the revenue on the taxes. As per 2020-21 budgets, on an average, nearly 70% of their revenue is projected to come from taxes (45% from their own taxes and 25% from their share of center’s taxes). Lesser gatherings in Centre’s taxes because of the lockdown has also influence states’ share in them. Sales Tax and VAT have been main sources of revenue for states, estimated to contribute 16% of states’ revenue in 2020-21. With application of GST, states can now levy sales tax only on petroleum products (petrol, diesel, crude oil, natural gas, and aviation turbine fuel) and alcohol for human consumption. Though, the lockdown has rigorously impacted the consumption, and thus sale, of all of these goods as most of the transportation is forbidden and businesses selling alcohol are also closed.
However, Compensation to states is given out of the GST Compensation Fund, which comprises of gatherings of a cess levied exactly to generate funds for this purpose. The cess is levied on coal, tobacco and its goods, pan masala, automobiles, and aerated drinks. The cess gatherings may see a shortfall as the sale of many of these goods is likely to be exaggerated this year. Note that domestic automobile sales declined 18% in 2019-20 over the previous year while coal production stayed constant.
The effect of the COVID-19 flare-up on the worldwide economy and function of trade. The most looking strategies depend on calculable general balance draws near, consolidating distinctive effect situations. While the expected lengths and stuns held for the situations fluctuate, the most noticeably terrible effects seem to hit public economies during the year 2020 with GDP falling inside the scope of 2%-3.9%, and world fares diminishing by as much as 2.5%. In the direst outcome imaginable, for example the plague changing into a pandemic, which we currently witness, fares would diminish by 4.6%, albeit less incorporated areas, for example, SSA would be the most un-influenced. Some of the points are covered are:-
To start with, the surveyed systems were set up at a time when the scourge was to a great extent restricted to China, and the likelihood of a worldwide pandemic past 2020 was just a slim chance. As COVID-19 is as yet spreading quickly over the globe and a subsequent wave is normal in the last quarter of the year, we accept all the outcomes for 2021 disparage the likely effects on the worldwide economy and exchange.
And the balancing effects of the strategy intercessions taken by public governments have not been remembered for the examinations introduced, albeit such measures can lessen the Covid's effects by 30%-40%, as indicated by the Asian Development Bank.