Analyzing India's Economy And COVID-19 Impacts Using GRI Standards And Economic Theories (Essay).

Overview of the Report

The report selects India as one of the country for critically assessing the major features of the Global Economy and also helps to analyze the shifts in economic power, and FDI trends (Singh and Neog 2020). The discussion has been supported by the GRI standards and shows that how international trade and trade relation of the selected with rest of the world is supported by the GRI standards. The GRI Standards have been developed so that it can strengthen the disclosures that made for showing the impacts on economy. GRI is identified as one of the widely used sustainability reporting standards and since it is a Universal Standards, it is used in India as well for improving the transparency of the economic development of the country (Rakshit and Basistha 2020). The report also utilises different economic theories such as Phillips curve theory, Absolute cost advantage theory, Keynesian theory, etc. to explain about the economic situations that India is facing due to Covid-19.

GRI has provided framework to various industries of different countries. It helps the company to report organization’s sustainability performance. It can be said that if the country is attempting to deal with the issues of the covid-19, then it cannot do so without the application of the GRI framework. It is known as the sustainability reporting framework and is required to be followed by the economic entities so that such economic decisions can be taken that can maintain the sustainability of the business. These economic decision based on GRI standards consists of three parts: Sustainability Reporting Guidelines, Sector Supplements and Technical Protocol. These three parts of the GRI framework have been utilized by the industries of India for applying the Report Content Principles to deal with the sustainability issues that were the results of the COVID-19 (Vidya and Prabheesh 2020). Therefore the GRI standards helped countries like India to provide adequate guidance on how the organizations operating within the national boundary can disclose their sustainability performance in true manner during COVID-19. The impacts of COVID-19 has been significant in most of the countries of the world. In the similar way, the impacts of COVID-19 were negative for the India as well. The policies that were made by different governments for reducing the spread of the disease impacted the international trade of countries like India. In addition to this, the country also suffer huge inflation and hike in interest rate that made the small and medium scale enterprise to suffer a lot (Kumar et al. 2020). Therefore, it became essential that the organizations within India adopted the GRI framework for dealing with the issues of COVID-19.

The situations that has been faced by the Indian economy can be linked with the theories like Phillips curve theory. Under Phillips curve theory, inverse relationship between the unemployment rate and inflation rate within an economy is studied. The theory states that the higher the inflation rate, the lower is the unemployment and vice versa. As per economic Times, the output gap that India is facing in its economy and current situations of inflation rates, can be studied using Phillips curve theory and shows indirect relation. The author of the article explains that the current increase in the inflation rate that India is facing is due to the deviation from the normal output level wthin the country due to COVID-19. RBI has identified that the output gap is one of the main reason for increasing the inflation within the country and resorting to monetary policies for dealing with the increasing inflation.

GRI Standards and Sustainability Reporting in India

Source: Economic times,

As per the Keynesian theory, the global economy is primarily influenced by the role to money. It suggests that a variation in the supply of money can permanently bring change in terms of real variables. For example: change in the interest rate, output level and the levels of employment as well as income. As per Keynes, financial crisis can bring problems of unemployment and inflation in the economy. In the similar way, it has been seen that the impacts of COVID-19 has adversely affected the Indian economy.

Figure 2: India’s GDP growth, Source:  growth Businessline  2021

From the above graph, it can be seen that India’s growth has rapidly declined since the last five years. However, the government’s effort in the form of fiscal policies for reviving the economy is helping the country to improve its GDP as shown in the figure. As per (Sharma and Mittal 2019), Indian economy is experiencing the fiscal deficit and presents a weak state of  economic affairs. The macroeconomic scenario is not very positive due to fiscal deficit problems. The fiscal deficit is causing change in the inflation as well as interest rate, impacting the GDP of the Indian economy. These findings of the study has been supported by the Neo-classical theory of Keynes. it is concluded that the GRI standards helped countries like India to provide adequate guidance on how the organizations operating within the national boundary can disclose their sustainability performance in true manner during COVID-19.

India has been a significant partner in the Association of Southeast Asian Nations (ASEAN), G20 summit, Indian Ocean Rim Association (IORA), etc. therefore, India has been taking major efforts for developing itself as one of the country focusing on the multilateral trade agreements. It can be said that India has good influence as well as image in the international trade and global economy. As per the news published by the Ministry of Commerce and Industry, the overall exports made by India during the years 2020 and 2021 especially between April 2021 and August 2021 are estimated at US$ 256.17 billion that shows a 44.04% YoY growth. In contrast, the overall imports done by India during the years 2020 and 2021 especially between April 2021 and August 2021, between April 2021 and August 2021 are estimated at US$ 273.45 billion (Agrawal, Jamwal and Gupta 2020). The current balance of trade of India is estimated at 22590 USD Million. United States has been identified as the largest trading partner of the country for the last 9 months since January to September, 2021. The trade relations between India and US have increased significantly during the current year approximately to 50% that is, 64.18% YoY growth (Salunkhe and Patnaik 2018).   

The trade ration of India and China has been very good. China can be considered one of major trading partner of India. China was considered India's second-largest trading partner in the financial year 2019.  The largest trading partner of India in the first half of FY 20-21 was China. However, during the recent financial years, bilateral trade between the countries declined to a 32.46% in 2020-21. China accounts for 5% of exports of India and also accounts for 14 % of India's imports in 2019 (Sun, Ma and Xu 2018).

Economic Theories and COVID-19 Impacts in India

Shift in economic power in India: the shift in the economic power is understood as the shift of the influencing power of any country in relation to the market. The power of influencing the market decisions such as selling and buying decisions can be considered as the most influencing decisions of the economy. The shift in power can also be identified as the shift in the influencing power of the intellectual decisions. The shifting of economic power can be seen in the Indian market where country is taking new economic decisions of expanding its current business or taking any new business decisions (Tregub 2018). During recent years, it can be seen that the India is expanding its trade relations with US and this has resulted in the shifting of economic power in certain ways. The United States and India’s trade relation can be seen as improving because both the countries are sharing economic interests in promoting global security, stability, and economic prosperity by developing bilateral trade, investment portfolios, and international connectivity. The trade relation between US and India can be seen reciprocal and balanced because both the countries are meeting their interest by shifting the economic power (Bin et al. 2021). For example- the US energy exports have increased significantly because of its expansion decision in relation to the Indian market. In addition to this, India purchased a significant proportion of its crude oil from US for meeting its oil requirements and this has shown a major shifting of influencing power in the India trade and economic decisions. India has been a significant partner in the Association of Southeast Asian Nations (ASEAN), G20 summit, Indian Ocean Rim Association (IORA), etc. therefore, India has been taking major efforts for developing itself as one of the country focusing on the multilateral trade agreements (Baldwin and Tomiura 2020).

FDI trends in India: During the financial year 2018-2019, the FDI of India was estimated as 62 billion dollar. During the financial year 2019-2020, the FDI of India was estimated as 74.4 billion dollar and during the financial year 2020-2021 the FDI of India was estimated as 81.7 billion dollar. There is no doubt that FDI of India has increased to a decent level during recent years. India has become the 5th highest recipient of FDI over the last year as per the report published by Mondaq.com. One of the reason for such increasing trend with respect to the FDI flows is the ever-increasing consumer demand within the country (Rakshit, Chatterjee and Paul 2021).

Figure 3: FDI of India, source: RBI website

Comparative Advantage and related trade models in analyzing a country’s role in the world economy.

COVID-19 impacts became one of the humanitarian crisis for overall international market. The country who became successful in making such strategic decisions that can make them self-reliant during these economic crisis, became successful in dealing with the adverse consequences of the covid-19. As per one of the recent reports, the pandemic has destroyed existing international trade and has increased vulnerabilities associated with it, especially for the developing nations. India has been impacted by the COVID also because it is also heavily linked into existing global value chains (GVCs). The pandemic has disrupted the existing manufacturing sector and other major industries of the world. Countries like India could have seen a drastic fall in the exports like many other developing countries and also could have experienced a decline in the import content of their exports. However, effective trade policies in developing countries like India helped it to continue to experience growth in its FDI (Banerjee, Anand and Bhide 2021). One of the comparative advantage of India to deal with the impacts of the COVID is that the country heavily depends on its traditional exports and import item in relation to its international trade. However, the country can improve its exports and international competiveness if it diversify its export contents to deal with the international competition. The country can easily deal with the issue of the falling export competitiveness by diversifying its export content. India’s overall exports can be seen as rising and therefore showing an increasing trend (Mishra, Patel and Jain 2021). The country’s exports have crossed over US$ 300 billion in 2018. However, it has been assessed that the country has faced a steady and sharp decline especially in the merchandise export growth after the year 2011. India’s comparative advantage can be seen in its traditional exports and that is also at danger due to increasing global competitiveness. India has already experienced a fall in its comparative advantage in relation to exports of precious stones, spices, jewellery, cotton, tea, fabrics, clothing articles and leather. The government of India has taken several steps to deal with the issue of the international trade in relation to COVID impacts (Mahajan and Kaur 2021).

India's International Trade Relations

As per the report published by leading Indian news agency (India Today 2021), the lockdown has been a success in India while it failed in other nations. The healthcare industry contributed significantly to fight the COVID-19. The Indian healthcare industry does not only worked for the country but because of the government support, it supplied COVID-19 relating medicines to more than 123 nations.

Example of economic theory relating to international trade and its integration with Indian healthcare industry: As per the theory of “Absolute cost advantage” (given by Adam Smith), there is necessity that free trade is supported by nations of the world. The countries should produce those products in which they have attained absolute advantage. As per this theory, the country should produce such products in which it has specialisation and can compete with other countries. If the country produces such products in which it has specialisation, the cost of labour and other producing charges will also be lower. This helps the country to earn benefits by exporting these products. The country that attains absolute advantage in one product attains cost advantage in such products. The healthcare industry of India exported 50 million hydroxychloroquine tablets to US to fights with the COVID-19 pandemic. The pharma industry of India has attained specialisation in producing hydroxychloroquine (anti-malarial drug) and it was discovered that the medicine can be significantly effective in treating COVID-19 infections (ETHealthworld.com. 2021). Thus, the country supplied the drugs to other countries like US. One of the advantage is that the country also attained financial strength by supplying such products in which it has specialisation for doing large quantity production of such products at reduced cost and with high efficiency. As per economic theory, government intervention plays crucial role when it is targeted towards equitable distributions of income or public welfare (ETHealthworld.com. 2021). The Indian government led down strict rules of lockdown to deal with the COVID-19 impacts because the spread of the disease was hampering the general public health of the country and leading economic crisis. The government intervention in terms of social distancing policies helped the country to curtail the negative impacts (India Business News - Times of India, 2021).

The example of companies that improved their international trade during COVID-19 because of its strategic decisions the Sun Pharmaceutical Industries. The company used strategy of strategic alliance and partnered with MSD, a company based in US so that it can extend its reach to Molnupiravir for selling their medicines and provide healthcare services. The example showed that the Indian healthcare companies identified huge opportunity in the international business during COVID-19 and also they responded positively to deal with such pandemic impacts.

Conclusion

Therefore, it is concluded that Indian international trade has been impacted by the COVID-19 impacts. However, the healthcare industry has responded positively to deal with the negative impacts of COVID-19. The company like Sun Pharma have improved their international presence. It is also concluded that it is concluded that the GRI standards helped countries like India to provide adequate guidance on how the organizations operating within the national boundary can disclose their sustainability performance in true manner during COVID-19.

India's Trade Relations with China

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