In December last year, reports started to emerge that a coronavirus that specialists had never before seen in humans had begun to spread among the population of Wuhan, a large city in the Chinese province of Hubei. Since then, the virus has spread to other countries, both inside and outside Asia, leading the World Health Organization (WHO) to declare this as a pandemic.
To date, the novel coronavirus — currently dubbed severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2) — has been responsible for more than 2.5 million infections globally, causing over 177,000 deaths. The United States is the most affected country.
A brief introduction of COVID19:-
SARS-CoV-2 is a coronavirus that causes coronavirus disease 2019 (COVID-19). Coronaviruses are a family of viruses that target and affect mammals’ respiratory systems. According to their specific characteristics, there are four main ranks, or genera, of coronavirus: alpha, beta, delta, and gamma. Only two coronaviruses have previously caused global outbreaks. The first of these was the SARS coronavirus — responsible for severe acute respiratory syndrome (SARS) — which first started spreading back in 2002, also in China. The SARS virus epidemic primarily affected the populations of mainland China and Hong Kong, and it died off in 2003. The other one was the MERS coronavirus — responsible for Middle East respiratory syndrome (MERS) — which emerged in Saudi Arabia in 2012. This virus has affected at least 2,494 people since then.
Effect on world economy: –
1). Share market takes a hit
- Big shifts in stock markets, where shares in companies are bought and sold, can affect the value of pensions or individual savings accounts (ISAs).
- Investors fear the spread of the coronavirus will destroy economic growth and that government action may not be enough to stop the decline.
- In response, central banks in many countries, including the United Kingdom, slashed interest rates. That should, in theory, make borrowing cheaper and encourage spending to boost the economy. Global markets did also recover some ground in late March after the US Senate passed a $2 trillion (£1.7tn) coronavirus aid bill to help workers and businesses.
2). Rise in unemployment: In the United States, the number of people filing for unemployment hit a record high, signalling an end to a decade of expansion for one of the world’s largest economies. Close to one million people in the United Kingdom also applied for benefits in just two weeks at the end of March
3). Crash in oil prices: Demand for oil has all but dried up as lockdowns across the world have kept people inside. The crude oil price had already been affected by a row between OPEC, the group of oil producers, and Russia. Coronavirus has driven the price down further. Brent crude is the benchmark used by Europe and the rest of the world. Its price dipped below $20, to the lowest level seen in 18 years. In the United States, the price of a barrel of West Texas Intermediate (WTI) turned negative for the first time in history. Although OPEC and other countries have now agreed to cut production, the world still has more crude oil than it can use.
4). Risk of recession: If the economy is growing, that generally means more wealth and more new jobs. It’s measured by looking at the percentage change in gross domestic product, or the value of goods and services produced, typically over three months or a year. But the International Monetary Fund (IMF) says that the global economy will shrink by 3% this year.
The IMF described the decline as the worst since the Great Depression of the 1930s. Although it said that the coronavirus has plunged the world into a “crisis like no other”, it does expect global growth to rise to 5.8% next year if the pandemic fades in the second half of 2020.
5). Travel took the huge toll: The travel industry has been badly damaged, with airlines cutting flights and customers cancelling business trips and holidays. Governments around the world have introduced travel restrictions to try to contain the virus. The EU banned travelers from outside the bloc for 30 days in an unprecedented move to seal its borders because of the coronavirus crisis in March.
In the US, the Trump administration has banned travellers from European airports from entering the US. Data from the flight tracking service Flight Radar 24 shows that the number of flights globally has taken a huge hit.
Effect on Indian economy:
The economic impact of the 2019–20 coronavirus pandemic in India has been hugely disruptive. World Bank and credit rating agencies have downgraded India’s growth for fiscal year 2021 with the lowest figures India has seen in three decades since India’s economic liberalization in the 1990. However, the International Monetary Fund projection for India for the financial year 2021-22 of 1.9% GDP growth is the highest among G-20 nations.
The Indian economy is expected to lose over ₹32,000 crore (US$4.5 billion) every day during the first 21-days of complete lockdown which was declared following the coronavirus outbreak. Up to 53% of businesses in the country will be significantly affected. Supply chains have been put under stress with the lockdown restrictions in place; initially there was a lack of clarity in streamlining what is an “essential” and what isn’t. Those in the informal sectors and daily wage groups are the most at risk. Major companies in India such as Larsen and Toubro, Bharat Forge, UltraTech Cement, Grasim Industries, Aditya Birla Group, Tata Motors and Thermax have temporarily suspended or significantly reduced operations. iPhone producing companies in India have also suspended a majority of operations. Young start-ups have been impacted as funding has fallen.
Some defence deals have been affected/delayed due to the pandemic such as the delivery of Dassault Rafael fighter jets. Stock markets in India posted their worst loses in history on 23 March 2020. However, on 25 March, one day after a complete 21 day lockdown was announced by the Prime Minister, SENSEX and NIFTY posted their biggest gains in 11 years, adding a value of ₹4.7 lakh crore (US$66 billion) crore to investor wealth.
The Government of India has announced a variety of measures to tackle the situation, from food security and extra funds for healthcare, to sector related incentives and tax deadline extensions. On 27 March the Reserve Bank of India also announced a number of measures which would make available ₹374,000 crore (US$52 billion) to the country’s financial system. On 29 March the government allowed the movement of all essential as well as non-essential goods during the lockdown. On 1 April, World Bank approved $1 bn in support to India to tackle the coronavirus pandemic. On 3 April the central government released more funds to the states for tackling the coronavirus totalling to ₹28,379 crore (US$4.0 billion). On 6 April a 30% salary cut for one year was announced for the President, Prime Minister and Members of Parliament.
Author: Keshav Jha
Education: Pursuing Economics Honours at Delhi University