Coronavirus: Impact on Global Economy
Coronavirus impact on Global Economy had a short-term fiscal impact and a long-term economic impact on the nations around the world. Efforts to curb the pandemic include imposing quarantine, preparing health facilities, isolating infectious cases, and tracing contacts involving public health resources, human resources and implementation costs. It also involves health system expenditures to provide health facilities to infectious cases and the arrangement of consumables such as antibiotics, medical supplies, and personal protective equipment.
Economic shocks are common during pandemics due to shortage of labor because of illness, rise in mortality, and a fear-induced behavior. Other than labor shortages, disruption of transportation, closed down of workplaces, restricted trade and travel, and closed land border are reasons for the pandemic’s economic slowdown.
Coronavirus: Impact on Indian Economy
Coronavirus had a huge impact on the global economy. The pandemic has changed the whole world economy in recent days. The coronavirus pandemic has reached almost every country in the world. There is no way to tell exactly what the economic damage from the global coronavirus pandemic will be. Most major economies will lose at least 3% of their GDP (Gross Domestic Product) over 2020.
The coronavirus has worsened the condition of not only India but also the world economy. According to the latest report of the World Bank, the corona virus is going to have a big impact on the Indian economy. Corona’s India’s economic growth rate will fall sharply.
Unemployment in India was at a 45-year high in 2019 and industrial output in the country’s eight core sectors fell by 5.2% at the end of last year. This was the worst situation in the last 14 years. In short words, the economic condition of India was already in bad shape.
Experts believe that now due to the effect of coronavirus, where there is a crisis on the health of the people, on the other hand the already weak economy may get a bigger blow.
Coronavirus affecting Sectors of India
India is also amid a severe crisis. “This is the greatest emergency for the Indian economy since independence,” said Raghuram Rajan, former RBI Governor. This is worse than the financial crisis of 2008, which affected the demand side but workers/people could still go to work, the financial conditions of government of India was sound but it seems that everything is against the economy this year.
Agriculture and allied activities
To contain the spread of Coronavirus, just like how other countries did, India imposed a complete lockdown in march which coincided with the peak of harvesting season of Rabi crops in India mainly in the north‐west which posed significant losses to the farmers. Although there were relaxations to the agriculture sector during lockdown but transport constraints, mobility restrictions and lack of labor due to reverse‐migration of labor to their native places were the major problems faced by the farmers.
Similarly, floriculture has been affected because of less demands due to shut down of religious places, postponement of marriages, and so forth. In livestock (milk, meat, eggs), milk is the major contributor that has been impacted and fortunately, had stability during the lockdown.
The manufacturing sector is the major contributor of GDP and employment in the secondary sector and has been recognized as an engine for vibrant growth and creator of the nation’s wealth
The micro, small and medium enterprises (MSMEs) as a whole form a significant share of manufacturing in India and play a crucial role in providing employment opportunities and also in the country’s exports. As indicated by recent reports MSMEs contribute 30% in India’s GDP and 50% in the employment of industrial workers. But this sector has issues like the non‐availability of adequate, timely, and affordable institutional credit. Although all the businesses and sectors are affected due to the pandemic, this sector is badly hit due to reduced cash flows, supply chain disruptions, shortage of migrant workers due to reverse migration, less demand, and so forth. Like China, India is also expected to have major destructions in this sector with more challenges to small firms as compared with upstream firms
There was also a great impact on the banking sector, but because banks were at the forefront of public attention the indirect impact of several other sectors that were hit by the pandemic was likely to be on the banks and other financial institutions. Banks were the only major source of help in times of crisis, therefore when all other sectors were hit badly, banks also faced the brunt.
Other important dimensions of service sector like aviation, transport, travel, and tourism are worst hit not only in India, but globally. The loss to this sector too will be based on the severity and longevity of the crisis. A report by KPMG indicates that around 38 million job losses are expected in India’s travel, tourism and hospitality industry.
Poverty, job losses and informal sector
According to the World Bank (2016) report, every fifth Indian is poor with around 80% population residing in rural areas.
At least 49 million individuals all over the world are expected to dive into “extreme poverty” as a direct result of the destruction caused by the pandemic and according to World Bank, India is estimated to have its 12 million citizens pushed in extreme poverty (Bloomberg, 2020).
According to the Centre for Monitoring Indian Economy (CMIE), in India more than 122 million people lost their jobs in April 2020, out of them largely were the small traders and wage‐laborers. According to a phone survey of 4,000 workers conducted by Centre for Sustainable Employment, around 80% of urban workers in the sample lost jobs with a sharp decline in the earnings of farmers and those who were self‐employed in sectors other than agriculture.
Psychological impact due to coronavirus — mental illness
Apart from the health and economic crisis, this is the major challenge to every country hit by the pandemic. Due to lockdown, mass unemployment, the collapse of various businesses, loss of income, increasing inequalities and poverty, deaths, less mobility, and so forth. there is a huge impact on the mental status of people. From older to younger, rich to poor, everyone is affected. This outbreak is resulting in additional health issues like anxiety, stress, depression, anger, fear, and so forth, globally.
Recent studies in psychological science and evidence show that similar pandemics like the current one increased mental health problems like post‐traumatic stress disorder (PTSD), confusion, loneliness feeling, boredom during and after the quarantine too.
The youth also faced several challenges as schools and colleges were closed and there was disruptions in studies, those who are weaker at studies and do not have internet access to study online (like in some rural areas, especially girls are not allowed to have a phone and internet connection) faced the brunt more. And those who were about to enter the workforce faced problems due to changing needs of the employers and less vacancies These all factors lead to mental stress and in extreme cases where people are already suffering from some mental illness, the consequences of this pandemic may be harsh.
Positive impact on environment
With serious negative implications and destruction to the economy and people, COVID‐19 has got some positive implications too.
One such is a gift to the river Ganga. In just 34–35 days of lockdown due to coronavirus in India, the pollution in the river has decreased significantly which the two major plans, Ganga Action Plan, 1986, and Namami Gange, 2014, with hundreds of crores investment could not do, said Prof. B. D. Tripathi, Chairman, Mahamana Malaviya Research Centre for Ganga.
There is a positive impact on air quality, water quality, wildlife and vegetation due to less traffic, less pollution due to lockdown and less business activities etc.
COVID‐19 pandemic has incurred unprecedented loss globally but India being an emerging economy is likely to get more affected in every sector and that too disproportionately. Agriculture and allied sector have been hit disproportionately with horticulture, poultry facing more brunt but overall agriculture sector is seen as a bright spot and is likely to get affected less as compared with loss occurred to other sectors. Manufacturing sector especially automotive sector and MSMEs are suffering more loss and due to global suppy chain disruptions this sector is affected badly. Service sector which is the key driver of economic growth and largest contributor of GDP has been hit hardly due to various restrictions on mobility, halt on tourism and hospitality for the time being, very less transport activities, shutdown of schools/colleges, and so forth. The overall loss to the economy and to different sectors depends on the severity and longevity of crisis.
Various fiscal and monetary policy measures are undertaken and announced by the government and Reserve Bank of India but prominent economists are of the view that more spending is needed by the government regardless of the GDP numbers and fiscal deficit. In fact, more attention is needed toward the vulnerable sections of the society and sectors especially poor people, MSMEs and the non‐essential commodities sector who is worst hit in this demand contraction due to pandemic. Unique, inclusive and innovative measures are the need of the hour.
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