Since last many days, a hundred and eighty nations square measure within the same line of threat by the fateful Coronavirus pandemic or the COVID-19. The impact and shocks created by this on the polity, society and economy within the world level is very overwhelming. There’s a high unexampled collapse within the world supply chains. A lot of care is needed for economic intervention during this period. It’s globalisation that makes the problem worse and during this trendy globalized world, cross-country linkages were the main route of supply chains, now with a 60 percent surge in freight cost.
The World Trade Organisation through its announcement declared that worldwide trade is predicted to fall between thirteen to thirty percent within the current year because of this fateful pandemic. It’s terribly essential to know the interaction between the pandemic and its impact on the economy because the queries of how, when, and in what means the issues which might be created by this may be resolved in an exceedingly fast spell of time. This is conjointly the time when the UN agency claimed that since the Great Depression of 1930’s, the planet economy as an entire had gone through a sharply negative downswing in its rate. In alternative words, the worldwide economy is grinding to a halt. In an exceedingly slim sense we are able to approximate that the start of 2020 started witnessing a selected divide of the time globally, which might be roughly outlined as a pre-corona and a post-corona period.
Within the western world, the policy measures are targeting the areas to limit the collapse of combination demand, providing liquidity to businesses and economic transfers to individuals losing jobs. It shows that even though the matter was known, there has not been a lot of emphasis on the broken supply chains. Clearly speaking one of the most pressing problems is the downside of institutional failures which has weakened technocratic, autonomous government officials and caused general under-investment in state machinery. With domestic establishments failing, high want of basic changes, as reforms not as revolution is obligatory for the present. One of the Indian states, Kerala has shown a high level of maturity within the above-named institutional setup that is far higher than the performance of some First World nations, particularly in its recovery rate.
Looking into the developing economies of Asian countries, the main issues and impact of the pandemic on the economy concisely elucidates as even in 2008, amidst a matter of demand shock, employment was a lot less affected within the country. However, currently it involves stagnation in real sense. Moreover, this issue is additionally a reverberation of supply shock with a coincidental presence of subdued demand and production retardation. Once China shuts down it’s suppliers, the Indian prescription drugs, vehicles, and particularly portable industries will be largely affected. Alternative sectors that will be seriously affected include land, banking, agriculture and production industries. Growth and survival of many industries will be severely wedged.
In the agriculture sector, the problem is huge thanks to the essential fundamental square measures which measure the months until the crops are ready for harvestation. Apart from this, the absence of working class and transportation problems can also have serious repercussions. In banking, problems might arise mainly out of dangerous loans and existing NPAs. However, RBI’s celebrated three-month moratorium policy will relax the impact to some extent. Fifty two CEOs of big Indian corporations already predicted huge job losses in the forthcoming days after the COVID-19 lockdown was imposed, on top of an already high percentage (a 45-year high) of unemployment before the occurrence of the pandemic.
Currently the rate is increasing once more with no management whatsoever. An economy like that of an Asian country, already plagued by high levels of illiteracy and a resistant state, can’t be very optimistic of the near future because the economic disruptions caused by the pandemic will only aggravate the existing problems. The loss of 3 million jobs points to the questionable capitalism within us.
It is vital to analyse the economic impact of COVID-19 on the present and expected rate of growth of the Indian economy to quantify the extent to which the pandemic has worsened the present scenario of economic retardation within the country. There is a huge necessity of this abnormal analysis in order to seek out a solution to a lot of debated political and economic policies of the government in power, and to pose political questions with a clear morality. If we tend to contemplate the same scenario from a political economy perspective, it will be a study identical to the well-known ‘Hicksian- Slutskian’ approach. To separate out the pre-corona and post-corona impact from the overall downswing impact of the pandemic on the Indian economy.
Once the developing economies are involved, there’s a necessity for some sort of central help by international establishments, intervention for the correct allocation of resources and coordination, apart from the financial authorities of the countries. Government and policymakers started reducing the interest rates as a means to stabilize economies that were wedged. There was a time once, when the supreme institution within the country refused to tally and publish the expansion projection, making things worrisome. Whereas, credit rating agencies like Moody’s expected a rate of 2.5% and syndicalist Sachs calculated it to 1.6%. There’s an urgent need for better coordination, better social safety and prioritising social distancing for this short period of time. Considering the Indian economy, the viability of an immediate money transfer may be possible within the short run. However, it wouldn’t be a good plan to follow in the long run. A lot of care is needed to stabilize the available chain issues. It might be conjointly a virtuous policy to initiate bailout packages for the bankrupted sectors.
What may be an honest financial policy is that the central banks ought to be able to offer overabundant liquidity to each bank and NBFCs, with special attention to MSMEs. It’s vital as the worst downside of the pandemic will be the economy experiencing a liquidity crunch. It is an extremely significant and frightening time as there should be considerable stress on devastating problems like climate change as well, to enable the proper functioning of the economy and society as a whole.
Compared to other developing countries, it’s somewhat positive that Indian economy can be higher than alternative economies. Even the nation’s biggest import of petroleum won’t be affected negatively in the immediate future, since oil costs have been cut down to a good extent because of the external shock of reduction in demand and in fast supply chain breakages. In the midst of all these present challenges and the ones that lie ahead, hopefully the Indian economy may take off with the correct synthesis of a sturdy and resilient financial support penetrating to lower levels of the society as well.
Mr Azharuddin Ansari is a research scholar in the Department of Economics, Jamia Millia Islamia.
Richa Singh is a student pursuing Economics from Jamia Millia Islamia.
Edited by: Varda Ahmad
Disclaimer: The opinions expressed in this publication are those of the author. They do not purport to reflect the opinions or views of The Jamia Review or its members.