Coronavirus or COVID-19 disease has continued its pace to encompass more human lives in India as we enter the third phase of the lock-down. This phase, as per government sources, scheduled to end of May 17, 2020. But given the Coronavirus Live updates in India for the past few days, it does not seem that the lockdown will end soon. Instead, the numbers tend to predict its extension for the time ahead.

Here’s what the Coronavirus Live updates in India says:

(Image Source: Ministry of Health and Family Welfare)

Since it was reported in Wuhan, China, on Dec 31, 2019, Coronavirus pandemic has spread across the globe and caused turmoil in the global economy. With news of deliberate lockdowns in various countries and the rising count of patients who tested positive under the impact of COVID-19, there seems to be no end to the assumptions made about the work-life, economy, and the overall impact on the masses. By this time, it has infected more than five lakh people across the world.

One crucial aspect about which people in India is expecting a clearer insight is the economic impact of COVID-19. Its uncontrollable spread has left diverse businesses across the globe to count the losses.

Brief Introduction to the Global Impact of COVID-19

Before the new financial year commenced, Coronavirus has dawned upon humanity and impacted businesses and lifestyles all over the world. Before it all started, there have been turbulences in the global economy, which are further aggravated by the demand and supply shocks inflicted by COVID-19. Once things come under control, the degree of recovery in the U.S. and China Market will have a crucial contribution in determining the economic impact of COVID-19 on the global economy. As per the UNCTAD report, India is one of the developing countries that will be least exposed to the recession.

For the Indian economy to survive these tough times, what’s most important is the provision of safety nets to the most vulnerable class of citizens and employment opportunities. Let’s discuss KPMG’s report on the potential impact of COVID-19 on the Indian Economy.

Global Economy and COVID-19

If you look at the GDP growth rate for the top 10 countries — GDP wise from 2018–2019, most of them have witnessed a fall in the GDP, including U.S. (2.9% to 2.3%), China (6.7% to 6.1%), and India (6.7% to 5.3%). Only Japan and the U.K. saw a slight growth in the GDP from 0.3% to 0.7% and 1.3% to 1.4% respectively. It implies that the occurrence of COVID-19 has increased the risk of a global recession in 2020 to some extent.

Impact of Social Distancing on Purchasing Manager’s Index (PMI)

While social distancing is good for people to prevent suffering from Coronavirus, it causes growing economic stress. There has been a steady decline in the demand for various non-essential commodities. If you look at the PMI data in the report, it says that anything below 50 implies a possible recession in the time ahead.

The recessionary conditions related to COVID-19 won’t be limited to the manufacturing industries, but also the services sector.

Debt, Demands, and Social Distancing — The Correlation

Debt capital markets, particularly in the U.S., have witnessed substantial strain because of the global spread of Coronavirus. The efforts made by the government to help individuals and businesses avoid debt defaults does not seem to help during these times of COVID-19. Higher debt levels make social distancing even more challenging for the economy.

P2P retail activity in restaurants has witnessed a steep decline in the last few months, with estimates that it will fall to a 100% decline ahead in time. Layoffs and pay-cuts across businesses in diverse industries show the harsh side of reality as well.

Wuhan as a Part of Global Supply Chain

As an integral part of the global supply chain, Wuhan can be considered an industrial hub. From Sulfuric Acid, yarn, fertilizers, to microcomputer equipment, it has its share in the national output of China for the world. Given the current impact of COVID-19 rising from Wuhan, it can be said that the production loss in a small economic area has the potential to disrupt global supply chains.

What Does a Stronger Dollar Mean for the Global Economy?

In these times, foreign currencies are becoming weaker than the U.S. Dollar, which would hurt the borrowers across the globe. To deal with this, Federal Reserve has also opened swap lines with global central banks. This is done as a step to ease dollar liquidity in the global markets.

Coronavirus Impact — What’s in Store for the Indian Economy?

The deceleration of India’s GDP to its lowest in the third quarter of the year 2019–20, along with the COVID-19 outbreak, posed severe challenges to the country’s economy. The nationwide lockdown for 21 days is expected to impact the consumption and investment side of the economy.

Explaining the Economic Impact of Coronavirus for Indian Economy

1. Expected Retraction by May 2020

While the number of new COVID-19 cases has been reduced considerably in China, other nations, including India, are expected to see fiscal stimulus back in place by the end of May 2020. It will make the hopes high for speedy economic recovery in India in the next half of the year. In that regard, India’s expected growth for 2020–21 would be 5.3 to 5.7%.

2. Global Recession

The Indian government has been working to control the spread of COVID-19. However, the impact of the global recession will overshadow the Indian economy as well, thus lowering the expected growth rate to 4 to 4.5%.

3. Extended Lockdowns Across the Nation

As COVID-19 cases increase in India, you can only expect the lockdown to get extended over time, which can further exacerbate the troubles for the economy. One possible result would be slower growth, even below 3% for this financial year.

Demand-Side Troubles

The lockdown situation is most likely to impact the consumption cycle of the consumers, which has a significant contribution to the Indian economy. The consumption expenditure of non-essential goods is witnessing a steep fall because of the decline in urban activity.

On the side of informal sectors, a significant proportion of the regular wage employees will face uncertainties in their income.

Supply-Side Troubles

Amidst the global lockdown, closed factories result in the delayed supply of raw materials for various small and big companies. More particularly, China, from where the trouble of COVID-19 came up, is one of the leading import sources for India. Whether it is electrical machinery and equipment, organic chemical and plastics, a wide range of products are imported from China. Since the businesses are not entirely reliant on the goods from China, the supply-side won’t make much impact on the country’s economy.

Frequently Asked Questions (FAQs) About Coronavirus Pandemic

What is Coronavirus?

As per WHO, Coronavirus is a family of viruses behind various illnesses, including the common cold, MERS and SARS Coronavirus.

Where Do COVID-19 Come From?

Coronaviruses have been circulating amongst animals over the year. In the event of spillover, some of these viruses get the capability to transmit from animals to humans. It is where the origin of COVID-19 lies.

What are the Best Ways to be Followed for Protection Against COVID-19?

Typically, Coronavirus causes respiratory health issues. For protection against the impact of COVID-19 on your health, basic hand hygiene is highly recommended. Also, you must avoid unnecessary contact with live animals. Make sure you wash hands after touching animals and cook the meat thoroughly before consuming it.

For more details, read general advice for the public for protection against COVID-19.

Summing It Up

The global crisis resulting from COVID-19 is full of uncertainties. What’s certain about the impact of Coronavirus is the new challenges it poses to the businesses. It all calls for a prudent approach to build the foundation of a better future together. If COVID-19 implications were to become the new normal for India, it is time to prepare for the related shifts to steer forward in the world post this crisis.

Author — Taranpreet Singh

Disclaimer: All the information and visual are taken from the KPMG’s report linked above.