Closed down malls, deserted airports, near empty trains and public transport buses, sparsely frequented restaurants and bars, closed schools and colleges, work-from-home becoming the norm, hardly anyone moving out of houses and several countries declaring emergency, the coronavirus scare has seeped in and the biggest casualty will certainly be the economy.
If till now there was a scare of an economic recession, it appears to be truly setting in. It is going to be another period of global financial crisis, like the one in 2008 that sent the world running for cover. Hardly had the global economy started picking up, then the next bout of disaster that has sent stock markets, often seen as an indicator of the course the economy is going to take, to abysmally low levels, has caught up. With the pandemic getting into the next stage and spreading across the globe like wildfire, the threat of an economic crisis like the one in 2008 where the subprime mortgages sent the global economy to deep crisis, appears to have come to stay.
This has come at a time when the global economy is yet to fully recover from the 2008 crisis and the economy has been moving towards a contagion impact of a crisis worse than that faced a decade ago. If India remained quite insulated from the 2008 crisis due to strong economy fortified by a bank of forex reserves, thanks to the UPA-I which may have plunged into rampant corruption and mismanagement during its next term and paid a heavy price for that, the economic situation in the country now is not conducive to facing the recession. The Government has been eating into these RBI reserves for its splurge on populist programmes and aims to take away more. No pep talk by the Prime Minister and his Finance Minister can help surmount the impending crisis.
Growth has taken a beating over the last few years, despite the efforts of the government to present figures that aim to paint a rosy picture. But the artists out to paint this image have only succeeded in shabbily doing the work and all big talk and cover-ups in the form of whipping up `patriotism’ and `nationalism’ have failed utterly in unfurling the disaster.
Even policies being followed at the time of such crisis go against tackling it. The best of these was the Finance Ministry last week raising the tax on petrol and diesel when fuel prices have been on the downslide. Somewhere the feeling has gone down to the people that it is the policy of this government that its people should not enjoy the benefits of this fuel price drop. What prompted the Government was its attempt to shore up its revenues at such a time of crisis. But how sound is this needs no study in a school of economics. When consumption has dropped to such low levels and steps to give it a boost is what is needed can be the only solution.
Already growth has slowed to the lowest over the decade and is estimated to be 5 per cent this fiscal. With the coronavirus pandemic growing, this growth could go down further and even hit the 2.5 per cent mark, seen as the point for recession. Consumption has dropped very much like investments and unemployment has been growing. Here too efforts of the Government to hide the figures failed miserably. Companies already began layoffs months ago. And in the present situation, the number of such layoffs are bound to go up and the more they are extended, the grave will be the crisis as company earnings are bound to shrink further. This would also mean that the 11.5 per cent targeted growth in corporate tax collection this fiscal will just go haywire.
This would mean lower revenue for the government which in turn could apply brakes on the government’s spending programmes. It still remains an irony that there is still no official assessment of the damage that the pandemic is expected to cause to the economy. There have been reports that Finance Minister Nirmala Sitharaman has said that an assessment has begun and there is still no clarity on when the government will arrive at some figure.
It is no rocket science to understand that closed malls will hit trade. Shutting down hotels and resorts, tourist spots, forest reserves, monuments and museums would mean no tourist flow, hurting for a State like Kerala whose economy thrives on NRI deposits, tourism and liquor sales. The pinch from the first of these will be felt soon as the non-residents across the globe have been facing problems in the countries where the pandemic is simply raging.
Airline companies, according to recent studies, are bound to go bankrupt very soon if this situation continues to remain the same, forget getting worse. This is nothing new for India whose national carrier has been flying through crisis and another has already been grounded with no takers. According to rough estimates, there has already been an over 80 per cent drop in international bookings and around 25-30 per cent dip in domestic bookings in the country. A clearer picture will emerge when the March quarter figures are out.
Commodity trade has seen prices going down on practically all items, be it spices, cotton, oil seeds, etc. This is certainly going to impact the farmer, the mainstay of Indian economy. Even the prices of base metals have taken a southern sojourn.
On the global trade front, too, the crisis is getting worse, China and Europe have remained the main destinations for Indian exports. Already, the virus in China, which it officially claims to have tackled successfully, has affected Indian exports of mainly textiles as also chemicals and automotives, the worsening situation in the European Union over the last few days will spell further disaster.
Unnerved seems the Government which is busy with its political dramas in Madhya Pradesh and now Rajasthan. The days ahead are gloomy and as the pandemic worsens, recovery for the economy will certainly take a longer period.