Author: Yogeshwar Singh; Edited by: Tufail Farooq
The eruption of huge pandemic called coronavirus has disturbed the political, social, economic, religious and financial structures. The top most economies such as China, US, Italy, France and many others are at the verge of collapse. Besides stock markets shrinking, the global oil prices have fallen off a cliff.
In just a week 3.3 million Americans have become unemployed and another 6.6 million started looking for new jobs. Also, many experts have warned the world of worsening condition in the financial and economic matters.
This fragile situation has brought the most difficult economic crunch since world war2.
It is observed that the economic recovery will certainly take time as it would be hard to bounce back from such grave impact that the countries have been hit with.
IMPACT ON INDIAN ECONOMY
To combat with COVID 19, India extended lockdown till May 17, 2020. Recently an industry survey that is jointly conducted by industry body FICCI and Tax Consultancy Dhruva advisors took responses from 380 companies across the sectors. It is said that businesses are grappling with tremendous uncertainty.
According to survey, COVID 19 is having a deep impact on Indian businesses, over the coming months jobs are at high risk because firms are looking for some reduction in the manpower. According to World Bank's assessment, India is expected to grow 1.5% to 2.8 %. The IMF projected a GDP growth of 1.9% for India in 2020 and said that it seems to be the worst recession since the great depression in 1930s.
Lockdown and pandemic has affected several sectors including MSME, hospitality, civil aviation, agriculture, and allied sectors and it has sizeably impacted the consumption which is biggest component of GDP.
In terms of trade, China accounts for 11% of world imports and 13 % of world exports which is largely going to impact Indian industry.
India's total imports account for 45% of China and almost two fifth of organic chemicals come from china. 70% active Pharma ingredients and around 90% of mobile phones come from china when in terms of Indian exports, China is India's 3rd largest export partner and will certainly effect the sectors like organic chemicals, plastics, cotton, ores etc. According to CII, GDP could fall below 5.5% in FY 2021 in absence of policy action. Seven out of eight core sector activities have shrunk since the announcement of lockdown. The core industry output has contracted by 6.5% in March. According to ministry of commerce, the highest contraction was observed in the cement industry that contracted by 24.7%.
GOVT INITIATIVES
Union Govt has announced number of financial measures including easing of digital filing of taxes and GST returns to ease the impact of lockdown in the country and to avoid any financial distress on lower income group. The Govt has also waived off fee on debit card transactions.
Minimum balance requirement of savings accounts has been done away with including the slashing digital charges. For delayed TDS, interest has been reduced to 9% from 18%. Govt also extended compliance under Income Tax Act, Benami Transaction Act, Black Money Act till
June 30 ,2020. In a major breakthrough Govt also announced a package of Rupees 1.7 Lac Crore in Pradhan Mantri Gareeb Kalyan Yojana.
WAYS AHEAD
Govt of India needs to announce packages in various sectors to revive economy in line with PMGKY. The foremost requirement is needed in MSME sector which is one of largest contributors in India's GDP. Govt should focus on demand for production in the industry to flourish and thus boost jobs.
As BHEL, a Maharatna recently invited foreign companies to invest in India as they are pulling up from China and they want to diversify. According to reports, BHEL wants to capitalise on their pull out and thus invited them to use the idle industrial units in India
Impact on the world economy
There is no exact way to measure the impact of COVID19 on the world economy. Many speculations were made before the spread of this pandemic but figures and stats are turning out to be different now. Earlier estimate made by the world economist predicted that the major economies will lose at least 2.4% of value of their GDP (Gross Domestic Product) over 2020 but global fall in the stock markets making world economies to ponder upon on serious note.
US
The US economy has entered a contraction. It appears that millions of Americans have already lost
jobs likely at a pace that exceeds job losses in the worst weeks of the great recession.
As the unemployment is shooting up more than the figures recorded during 2008 crisis which is a sign that the economy is headed towards recession. Consumption makes 70% of the America's GDP, but consumption has slumped as businesses are closed and households have held off on major purchases. Investment makes up 20% GDP, but businesses are putting of investments as they wait for clarity on the full cost of Covid 19. Art, Entertainment, Recreation, and restaurants constitute 4.2% of GDP. With restaurants and movie theatres are closed, this figure would now be closer to zero until quarantines lifted. Manufacturing makes up 11% of US GDP, but much of this will be disrupted too, as there is reduction in demand.
United States of America is now trying to mobilise money in the respective sectors to revive the slowdown but its native to predict how much time it will take to get on track.
CHINA
China pioneered in facing the economic and financial crisis. Food and beverage, Retail, Real Estate
and travel are the four biggest losers. A lot of people in these sectors have either been furloughed
for a period of time or have lost their jobs completely. Migrant workers in the construction sector are also hugely impacted. The most relevant benefit to businesses have been partial waiving of the social security contribution made by the employers on behalf of staff February to June.
At the moment, some sectors are booming as China is already advancing in 5G sector which is all about digital and remote networking. During pandemic, China has probably pulled further ahead in the race.
With a fast recovery seeming highly unlikely, many economists expect China's economy to shrink in 2020, the country's first decline since 1976.
EUROPEAN UNION
The European Union's GDP decreased by 3.5% in the first quarter of this year according to Eurostat
(Official Statistics Agency). France's GDP fell by 5.8% in the first quarter, “the biggest drop” since 1949 revealed by INSEE (Statistics Agency).GDP's negative evolution in Q1 2020 is primarily linked to the shutdown of non-essential activities in the context of the implementation of the lockdown since mid-march by (INSEE) which clearly shows that country is in recession. Italy has also entered into recession in the first quarter with GDP decreasing by 4.7% compared to the previous quarter, the ISTAT statistics agency said. “It seems to be worst since 1995. Spanish economy contracted by 5.2% as compared the previous quarter, INE statistics agency said and added that this is worst since 1970s.
OIL PRICES WAR
Oil prices war started between Russia – Saudi Arabia by Saudi when Russia refused to lower down oil prices in order to keep oil prices at moderate level amid corona virus which led to crashing of oil prices. The recent collapse of oil prices is likely to cause further recession to the global economy that is already suffering deterioration over the on-going COVID-19 pandemic. The decline in oil demand amid shutdown in almost every part of world and price war between key producers led to further collapse of oil prices. Various agencies of the world are making presumptions that this would lead to economic recession as well as deterioration in the budgets of the oil exporting countries.
The unprecedented decline of oil prices worldwide would surely worsen the global economy especially US economy in particular.
CONCLUSION
In this globalised world and in such global crisis everyone should come forward with helping hand rather than restraining oneself for example US is now adopting conservative measures to keep itself away from deterioration as it is partially blocking the immigrants to US exempting temporary workers. If such techniques will be adopted by other states then it will lead to screeching halt in world economy. India is leading from front helping the nations to fight with corona by exporting Hydroxychloroquine which is acknowledged by everyone.
The author is an LLB graduate from Udhampur, Jammu.
