As we all know due to the COVID-19 pandemic the entire world is facing economic problem now a days. This is the small study on what scale covid-19 will affect the nations economy and what will be its effects on recession.
The global economy could shrink by up to 1 per cent in 2020 due to the coronavirus pandemic, a reversal from the previous forecast of 2.5 per cent growth, the UN has said, warning that it may contract even further if restrictions on the economic activities are extended without adequate fiscal responses.
The analysis by the UN Department of Economic and Social Affairs (DESA) said the COVID-19 pandemic is disrupting global supply chains and international trade. With nearly 100 countries closing national borders during the past month, the movement of people and tourism flows have come to a screeching halt.
Impact on Economy of India :-
Prime Minister Narendra Modi on Thursday reviewed the impact of COVID-19 on the Indian economy and a possible second stimulus to boost sectors hit hard by the pandemic.Modi held discussions with Finance Minister Nirmala Sitharaman as the pandemic hit sectors from small industries to the aviation sector hard with millions of jobs at stake.
The meeting comes amid drastic reduction in GDP growth forecast by various multi-lateral funding agencies for the current fiscal due to the impact of COVID-19 and consequent lockdown.
State of the economy was discussed in details during the meeting, sources said, adding resource mobilisation for taking on the future challenges was also highlighted.
As per the World Bank’s latest assessment, India is expected to grow 1.5 per cent to 2.8 per cent. Similarly, the IMF on Tuesday projected a GDP growth of 1.9 per cent for India in 2020, as the global economy hits the worst recession since the Great Depression in 1930s.
The pandemic and consequent lockdown have hit various sectors, including MSME, hospitality, civil aviation, agriculture and allied sector.
Raw materials and spare parts
Nearly 55% of electronics imported by India originate from China. These imports have already slid down to 40% in light of the coronavirus outbreak and subsequent lockdown. As a countermeasure, India is considering the promotion of indigenous production in a bid to reduce dependency on a single market.
The toll on the pharmaceutical industry is of significant concern for India, mainly as 70% of active pharmaceutical ingredients (API) are imported from China. These active pharmaceutical ingredients are essential to a large number of pharmaceutical manufacturing companies in the country.
India is big on cultural and historical tourism, attracting domestic and foreign nationals throughout the year. It does not come as a surprise that a large number of confirmed COVID-19 cases in India include foreign tourists. But with visas being suspended and tourist attractions being shut indefinitely, the whole tourism value chain, which includes hotels, restaurants, attractions, agents, and operators is expected to face losses worth thousands of crores.
Will rationalizing tax rates or providing tax relief help curb the impact of COVID-19 on the Indian economy?
Speaking on measures to combat the economic impact from the rapidly spreading coronavirus, Chief Economist of the International Monetary Fund, Gita Gopinath said that Government policymakers would need to implement a substantial targeted fiscal. She also advised on broader monetary stimulus and policy rate cuts to help normalize the economic situation.
India is already running short on its GST revenue collection, and the coronavirus scare could make matters worse. With less than 200 active COVID-19 cases in a 1.33 billion population, the Government of India is not in a rush to make any drastic changes in policy and offer tax relief (even though Indian enterprise leaders are calling for cuts in import duties). They have, however, announced an extension in filings of GST for FY 2018-19 until June 30, 2020. India has also rescheduled the introduction of mandatory e-invoicing until October 1, 2020.
Impact of the coronavirus pandemic on the global economy:-
While there is no way to tell exactly what the economic damage by global COVID-19 novel coronavirus pandemic will be. Early estimates predicated that, should the virus become a global pandemic, most major economies will lose at least 2.4 percent of the value their gross domestic product (GDP) over 2020, leading economists to already reduce their 2020 forecasts of global economic growth down from around 3.0 percent to 2.4 percent. To put this number in perspective, global GDP was estimated at around 86.6 trillion U.S. dollars in 2019 – meaning that just a 0.4 percent drop in economic growth amounts to almost 3.5 trillion U.S. dollars in lost economic output. However, these predictions were made prior to COVID-19 becoming a global pandemic, and before the implementation of widespread restrictions on social contact to stop the spread of the virus. Since then, global stock markets have suffered dramatic falls due to the outbreak, and the Dow Jones reported its largest-ever single day fall of almost 3,000 points on March 16, 2020 – beating its previous record of 2,300 points that was set only four days earlier.The economic damage caused by the COVID-19 pandemic is largely driven by a fall in demand, meaning that there are not consumers to purchase the goods and services available in the global economy.
This dynamic can be clearly seen in heavily affected industries such as travel and tourism. To slow the spread of the virus, countries placed restrictions on travel, meaning that many people cannot purchase flights for holidays or business trips. This reduction in consumer demand causes airlines to lose planned revenue, meaning they then need to cut their expenses by reducing the number of flights they operate. Without government assistance, eventually airlines will also need to reduce lay off staff to further cut costs. The same dynamic applies to other industries, for example with falling demand for oil and new cars as daily commutes, social events and holidays are no longer possible. As companies start cutting staff to make up for lost revenue, the worry is that this will create a downward economic spiral when these newly unemployed workers can no longer afford to purchase unaffected goods and services. To use retail as an example, an increase in unemployment will compound the reduction in sales that occurred from the closure of shopfronts, cascading the crisis over to the online retail segment (which has increased throughout the crisis). It is this dynamic that has economists contemplating whether the COVID-19 pandemic could lead to a global recession on the scale of the Great Depression.
Despite the clear danger that the global economy is in, there are also reasons to be hopeful that this worst-case scenario can be avoided. Governments have learned from previous crises that the effects of a demand-driven recession can be countered with government spending. Consequently, many governments are increasing their provision of monetary welfare to citizens, and ensuring businesses have access to the funds needed to keep their staff employed throughout the pandemic. In addition, the specific nature of this crisis means that some sectors may benefit, such as e-commerce, food retail, and the healthcare industry – providing at least some economic growth to offset the damage. Finally, there is the fact that the crisis may have a clear end date when all restrictions on movement can be lifted (for example, when a vaccine is developed). Taken together, this means it is at least possible the global economy could experience a sharp rebound once the pandemic is over. There are still many variables that could affect such an economic recovery – for example, a reduced supply of goods and services to meet lower demand could create mid-term shortages and price increases – but there are some reasons to think that, with the right mix of appropriate government responses and luck, some of the more apocalyptic predictions may not come to pass.
Expected recovery chart after COVID-19:-