COVID-19: A Big Blow to Health and Money

The coronavirus pandemic has wreaked havoc all over the world. It is one of the darkest episodes
in the history of humankind. A health crisis of this scale which seemed unimaginable a few
months back has become today’s unfortunate reality. The 2019 coronavirus outbreak in Wuhan
has spread to all parts of the world resulting in close to 3 million cases at the moment as I am
writing this. More than 2,00,000 humans have succumbed to this relentless beast, and so many
more are fighting with all they have got. However, the coronavirus pandemic is as much an
economic crisis as it is a health crisis.

The International Monetary Fund (IMF) predicts that the world economy is going to contract by
3% this financial year due to the pandemic. To put the number into context, the 2007-08
financial crisis had resulted in the world economy shrinking by 0.1%. In fact, the IMF claims
that the economic loss of this pandemic might just outdo the negative impact of the Great
Recession of 1933. Here is the thing then- Millions of lives and the economy are in danger. But
if one stops scratching the surface and digs a little deep, the multi-layered affects of the
pandemic comes to the fore.

Let’s take the Indian context. The Indian economy was already crippling in a slowdown. With
unemployment figures at a 45-year high, growth figures at 5-6% and some sectors like real
estate, automobiles, etc performing poorly, the economy desperately needed a turnaround of
sorts. It didn’t help that the consumption demand, owing to several economic shocks in the form
of demonetization and GST, was at a downward curve. But as we were just expecting a positive
change we are perhaps hit by the worst wave imaginable- the COVID-19.

Currently, the country is under severe lockdown. The entire nation while only allowing essential
businesses to perform transactions is waiting for the curve to flatten. The corporate sector looks
shocked. While the gold standard firms (Google, McKinsey, HUL etc) will be able to ride out
this bad tide, it won’t be easy for the unicorns and the silver and bronze standard firms- the ones
who don’t have the required liquid reserves. The start-ups and especially the MSMEs are facing
the worst possible nightmare. While the balcony-population (middle and upper middle class)
might not be in the direst conditions, the lower class I am afraid is being pushed to the brink. The
migrant laborers, the daily wage workers and the entire unorganized economy workers are
clueless as to where their next meal is going to come from. The organized economy white-
collared workers might soon witness massive pay-cuts and furloughs.

The govt. is absolutely trying its best to save as many human lives as possible. There’s of course
no greater wealth than human capital. But if some serious attention is not given to economic
policy-making, we might soon find ourselves in a deeper danger. There needs to be a well-
designed multipronged policy response of an unprecedented scale to prevent the cracks in the
Indian economy from widening. With an impaired monetary policy transmission channel,
aggressive fiscal policies together with unconventional monetary policies are likely to be the go-
to options.

This is a testing time for the entire human race. I can only hope we come out stronger!