Dr GSK Velu, Chairman & Managing Director, Trivitron Healthcare Group elaborates on the how countries can get together to help one another in dealing with the current pandemic and how the government can counter the effects of a demand-driven recession
The coronavirus outbreak is a human disaster, affecting countless individuals. It is also having a growing impact on the worldwide economy. As the global economy heads towards recession, the economic damage is mounting over all nations, following the sharp rise in new infections, and containment measures put in place by governments. Almost every nation has reported cases of infection however, the burden is asymmetrically distributed. Some countries are at the peak of the viral spread and are immediately developing their health systems. In other parts of the world, the number of cases is rising rapidly. India too has witnessed a significant increase in the number of infections since the beginning of April and has advanced its response, including extending the nationwide lockdown.
The COVID-19 pandemic has left a deep imprint across different segments of the world economy and set off an unprecedented slowdown. India, as a rising economy, couldn’t have kept itself protected from the tribulations of this emergency. For India, the COVID-19 pandemic couldn’t have come at a more regrettable time. The Indian economy was estimated to grow at 5.5 per cent but that growth estimate has now gone for a toss. World Bank and credit rating agencies have downgraded India’s growth for fiscal year 2021 with the lowest figures India has seen in three decades since India’s economic liberalisation in the 1990s. However, the International Monetary Fund projection for India for the financial year 2021-22 of 1.9 per cent GDP development is the most elevated among G-20 nations. Also, during the lockdown, an expected 14 crore (140 million) individuals lost employment. More than 45 per cent of households across the country have reported an income drop as compared to the previous year.
The much necessary ‘lockdown’ and suspension of work and movement, announced by the Indian government, to contain the progression of infection in the country has brought a slump in consumer demand with individuals just purchasing fundamental products and maintaining a strategic distance from the acquisition of trivial items. Sectors like travel and tourism, restaurants, shopping centres, and multiplexes have been the worst affected with almost immediate effect. Migrant labourers are seen swarming over our national roadways amid the lockdown, small businesses are forced to shut shops resulting in job losses. In short, the less advantaged has been hit by the lockdown, a vital aftermath of the pandemic, the most noticeably terrible consequently adding to our woes.
Going by predictions from nodal monetary agencies, a recent IMF report projects that the growth decline would be very sharp. Worldwide, the situation would be even worse with a colossal increase in unemployment, mostly in the unorganised sector. According to the analysis by the United Nations Department of Economic and Social Affairs (DESA), COVID-19 pandemic is estimated to have disturbed global inventory chains and stock exchange. With nearly 100 countries closing their borders, the movement of raw materials have come to a dramatic halt consequently disrupting production and economies dependent on manufacturing. Furthermore, COVID-19 is severely impacting manufacturing production in developing countries because of a decrease in demands of raw materials as well as finished goods, disruption in value chains, partial working of offices and factories, and so on.
Times like this call for a joint effort from countries all around. Despite the evident danger the global economy is in, there are also reasons to be hopeful that the worst-case scenario can be avoided. Governments have learned from previous crises that the effects of a demand-driven recession can be countered with government spending. Thus numerous governments are expanding their monetary welfare to citizens and ensuring that businesses have access to funds needed to keep their staff employed throughout the pandemic. Moreover, certain businesses have also benefited during the crisis such as e-commerce, food retail, and the healthcare industry – providing at least some economic growth to offset the damage. Finally, we still have hoped that all restrictions would be lifted (once the vaccine is developed) this would lead to a sharp bounce back once the pandemic is over. There are as yet numerous factors that could influence such economic recovery, for instance, a reduced supply of goods and services to meet lower demand could create mid-term shortages and price increases – but there are some reasons to think that, with the correct blend of fitting government reactions and luck, a portion of the more apocalyptic predictions may not happen.