Corona virus and Economic Environment

Most of the infectious diseases in humans are zoonotic. In other words, they come via animals. To restore balance in the ecosystem, we need to live in harmony with nature. A healthy eco system will protect us from such diseases as long as we rebuild our businesses by working with the nature and not against it.

Corona Virus & Economy

Countries have to give importance to both, economy and lives, they need to strike a balance between lives and livelihood. Covid19 has changed every aspect of our daily life. As consumers we are spending less with the anticipation that incomes may fall in the future. The factors that determine a consumer’s spending is their confidence, cost of living, employment type, etc. Covid19 has totally changed the way consumers choose to spend their hard earned money.

There is a clear connection between the sentiments and spending. According to an article by World Economic Forum, people have reduced spending on non-essential products and services but increased spending on home entertainment and groceries. The world economy is at the verge of collapsing, just because people are only buying things that they require to survive.

The effect of the decreasing consumption expenditure of consumers is forcing businesses to stop their operations. Real economy is extremely interconnected and interwoven. For instance, as the restaurants are closed the green stock is being wasted and the workers are losing their income as they are out of work and hence, they now spend only on essentials. On other hand, businesses still have to pay the rent, power bills etc. Since inventory stock is locked up and not converted into goods to be sold, they do not have revenue even though the expenses and losses are increasing. 

As the demand and supply drops in economy, there is slow movement of money. All this is due to lack of economic activity and this hits everybody. This initially happens across the sectors, then across domestic economy and finally across the world and thus becomes the reason to worry.

Corona Virus and Government

This situation has put huge responsibility and power in the hands of the government. In a scenario of lockdown when government is telling public to stay at home and not go to work, it becomes their responsibility to provide for them too. There is no choice but to hand over money to the weaker sections of the economy, like the millions of daily wage workers who will face crisis as they are asked to work in the lockdown period for which the government has to borrow heavily.

Long road ahead

The fiscal stimulus that the government declares is the only hope for economic revival, as the other motivators of revivals such as consumption expenditure, exports, investment etc. have all slowed down and will really take time to gear up. Such stimulus packages will only help in reducing the impact of recession. Government will require to keep more money with the public to improve economic environment, to restore the confidence and boost investment and consumption spending.

With a borderless world, where globalization has made all the countries interdependent on each other, economies needs to cooperate to facilitate global recovery. India has done relatively better till now when it comes to global slowdown or recession due to its huge population which creates a huge domestic demand for economy to run and therefore rely less on external demand. This means that India has relatively lower dependence on external sector.

On the other hand, countries which highly depend on world trade for their growth will certainly take time to bounce back. In the recent situation, local interest has taken over global interest, which is very natural and obvious but for global recovery the movement of capital and labour has to be made easy. We have a lot that has been lost and so, there is a lot we have to rebuild.

Sonali Mangudkar