People are scared about the physical implications of the Novel Coronavirus. Its sneaky attack on the world economy is drastic. The lockdowns and curfews have started to show their effects by hurdling economic growth and activities. It is difficult for countries to focus more on the economic downfall when their countrymen are dying. Yet, in the long run, this global economic depression will present a high price to pay.
Global economic impact and response to the pandemic
1. Remembrance of the 2008 market crash
The downfall of the world economic condition resembles that of the 2008 economic destruction that forced the Lehman Brothers to file for bankruptcy. Business News Today has reported that the asset market has shown a steep dip as well. Due to potential losses ahead due to a halt in business activities, a lot of investors have withdrawn their investments. It can force businesses to close due to loss of investment and the risk-free attitude of the potential investors.
2. The response of different countries
The kind of response that different governments showed during the 2008 recession was overwhelming. The central banks across the world have eased liquidity regulations. The stimulus package by governments all over the world to battle the COVID-19 news is close to $250 billion. The funds that have been pledged by the government with the World Bank are counted in this above figure. The rescue packages have just begun to be presented by countries. Even the IMF has offered the help of $50 billion to developing countries for combating the spread of COVID-19.
3. Daily wage earners’ woe in India
India is mainly associated with the service industry, with a majority of its workforce engaged in agriculture and other service jobs. According to Business News Today, the biggest losers in the spread of the virus and lockdowns would be the lower economic section of the society. The daily wage earners are hit the hardest due to the halt in work. If the lockdowns extend longer, it might be difficult for them to even fend for themselves. Small businesses, especially cottage industries, will take the blow of the virus hard.
4. Sluggish Indian firms
India is no stranger to the financial drop in the industry sector, especially when it has been suffering for some time. The COVID-19 news has reported that the value of rupee is likely to drop more in the international financial market. If this happens, the firms that have received foreign loans and investment would be in deep trouble. The cut down of imports has already shown negative impacts on the firms, and any additional financial burden on them could prove to be fatal.
5. RBI’s role amidst the pandemic
The only way to make sure that firms do not suffer in such critical times is by giving them a reduction in rates and relaxing payment agreements. That is what the RBI has aimed. Reduced pressure to the firms for meeting their loan repayment deadlines is one of the concrete steps taken by the central bank of India. Another one has been the withdrawal from forcing the state-owned banks in giving out loans to the sectors that the centre deems fit.
These are the significant economic implications across the world, especially India. The situation does sound bleak, but the right steps towards better financial coordination will make for a better future.