Edited by Abhinav Dev Gupta
The number of COVID 19 cases just crossed 700 marks yesterday when India was in its 2nd day of complete lockdown and USA now has the highest number of COVID 19 in the world overtaking both China and Italy if the situations remain the same then very soon the USA will become the first country to cross the 1 lakh mark within a day or two and it means that it will extend it lockdown and if world largest economy sees lockdowns like this it directly affects the world economy so we all have to brace our self for a big world economic recession.
Before the Corona Virus entered India, it was already facing a major economic slowdown due to which GDP growth was already near 5% and unemployment was at an all-time high in the last 45 years. But the year 2020 was of great hope for us as it was considered as a recovery period or we can say that Covid-19 has hurt recovery prospects and now as we are in the middle of this crisis and things are expected to become more worse in the coming months. The informal sector which forms the backbone of the Indian Economy will be the worst hit and will dramatically decrease our economic growth in the subsequent quarters.
We all know that the credit flow of the economy was already hampered because of severe liquidity constraints in the bank and non-bank financial sectors. This current condition(lockdown) will further slow down the consumption side which will further haul the production which is already on halt. Moreover, the widespread loss of income for businesses and individuals across the country will have a multiplier effect throughout the Indian economy. The “supply-side contagion effect” will show its impact on manufacturing, agriculture and the pharmaceutical industry, which will lead to consumer durables, automobiles and pharmaceuticals feeling more burn of supply constrain. Sectors like aviation, tourism, and hospitality are already facing the crisis in which aviation is the worst affected and if the lockdown is extended, we can see a lot of Airlines shutting down even the world’s biggest without the interference of the Government.
Not all things are against us there are some factors which will help us to reduce the impact of this crisis like we won’t suffer as much in the case of world economic recession, given that it has a smaller exposure to the global economy exports of services and goods are only a fifth of the total economy. A lot of cushions will also be provided by the lower oil prices as it will boost Government revenue which can be further used in boosting the economy by providing relief funds. The correction in the CPI in January 2020 has also created room for rate cut which can help in dealing with the liquidity problem.
Various steps have been taken by the Government to tackle the coronavirus pandemic in view to this a 1.7 Lakh Crore Economic stimulus plan has been announced by the Government which accounts for just 0.8% of our GDP which is way less than the relief plan announced by the other countries in term of their GDP percentage, in coming months further addition should be made to this plan so that this plan should account for about 2-3% of our GDP and can help in providing real relief from this pandemic. The current plan is aimed at providing direct cash transfer and food securities measures to millions of poor who all are hit by the lockdown announced by the GOI.