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The COVID-19 pandemic has put almost the entire world on halt. As of April 1, 2020, almost 900,000 COVID-19 cases have been reported worldwide with a death toll of over 44,000. Apart from the grave Humanitarian crisis that it has brought, another very important issue of concern is the Economic slowdown that will follow. Most countries in the world have imposed lockdowns in order to contain the spread of the virus which is directly impacting the different sectors and most importantly the service sector of the economy.
As shops, Restaurants, factories around the world remain closed, a lot of people are dependent on the governments for their day to day expenses. Over 10 million people applied for Unemployment benefits in USA in the month of March.
Although such injection is in part advantageous to keep the economy running. It also puts a tremendous pressure on the governments around the world who are likely to see revenue losses as the tax income will shrink owing to lower income levels as well as consumption. The outbreak can even lead to loss of jobs as companies will lay off workers to cover the losses they are bound to face as well as to match the shrinking demand.
Restrictions on movement domestically as well as internationally have posed significant challenges for the global supply chain networks as well as the tourism sector. 170 out of 180 members of the International Monetary Funds are experiencing a decline in per capita income. According to the International Monetary Fund and the World Trade organization the Global trade decline is likely to exceed the trade slump brought in by the global financial Crisis of 2008-9.
Due to trade tensions between the USA and China and imposition of stricter trade policies by the developed countries there was already some uncertainty surrounding the global economy leading to a fall in the merchandise trade volume by 0.1% in 2019 whereas the volume of commercial exports rose by 2%, however, the pace of expansion was slower as compared to the previous year. On top of this, the uncertainty brought in by the pandemic is unprecedented and has forced the government to take extreme measures. Since, no concrete information has been ascertained on how long will the pandemic last and we have yet to come up with a vaccine, most of the analysis by the experts are based on expected data. The recent development in China’s Wuhan city may have given people some hope, but the reoccurrence of cases in the country has made people even more worried about the uncertainty associated with this pandemic.
When faced with such uncertainty investors tend to panic sell their stocks making the stock market extremely volatile and affecting investor confidence negatively. The COVID-19 has already had a huge impact on the stock market as reflected by the historical fall in the share value of S&P 100 in the month of March. These signals are enough to conclude that world economy is going to be severely hit by the COVID-19 fiasco, however, a recovery is expected in 2021 which can be achieved through strong fiscal and monetary policies, open and predictable economies and coordination between the countries around the world.
How will the Indian economy get affected?
For the Indian Economy, it comes at a time when the economy was already facing a lot of challenges and was finally showing the signs of recovery. “In the next quarter, we will be lucky if we get a zero-growth rate. But it (GDP growth) could be even in negative. The overall growth rate for the financial year however will not go below 3-3.5 per cent. It’s too early to say anything because there are many factors that remain unknown,” Rajiv Kumar, the Vice- Chief of Nitiayog said. According to a report from Business standard India may have lost 7-8 trillion Rupees in the 21-day lockdown, nonetheless, these are testing times and there is no denying that the first and the foremost goal is to protect the lives of the human beings across the goal, but it is also important to be ready for the challenges that are ahead of us in order to face them head on as and when they come to make sure that human sufferings brought in by this health crisis isn’t intensified by a prolonged Economic crisis as well.