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Impact of Corona Virus on the Economy

Coronavirus has brought a Life Time Opportunity for everyone in India let it be investors, manufacturers or entrepreneurs, the only need is to stop the panic and grab this opportunity wisely.

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The spread of Corona pandemic is adversely affecting the world economy. The outputs are at decades low. There is a shortage of many products and more than the pandemic, panic is spreading like crazy. 

The most affected countries are China, Italy, Iran, USA and many other countries are also severely affected. Italy has faced a complete lockdown. With USA’s national emergency many such actions have been taken by different countries. 

This virus is spreading in India as well, though comparatively low. Though India and Italy detected first 2 cases on the same day today Italy has 31500+ cases and India has around 150+ cases. The virus is not multiplying rapidly in India which is good for us but doesn’t mean that it won’t. Everyone must take precautionary measures and take care of one’s health. 

In Indian stock markets, Nifty is trading under the 9000 psychological level for the last few days and Sensex is trading under 35000. Many stocks are trading at a very low price. If Nifty closes below 8850 continuously for two days then that will be very bad for our economy and the recession will start.

This world situation could be a great opportunity for Indian economy especially the manufacturing sector. The world has seen many such viruses and infections root from China. The world is dependent on China for its outsourced manufacturing. After every such spread of infection, the output falls drastically which shouldn’t be tolerated every time. The companies will search for other options and India with cheap labour is definitely a great option. Accordingly, the government must take required measures after the Coronavirus effect neutralizes. 

- The government must start announcing such measures so that the aimless fall of markets reduces and gets a boost instead. 

- The manufacturing sector should also increase their production and should think more about sales and reduce their margins.

- Even traders should stop being bearish and should understand that there is no reason for this fall. 

- Investors should invest in bulk in such markets as many stocks are trading at very low prices. 

In the worst condition, that is, if India goes into recession, the recession won’t last forever. Not only the manufacturing sector but also the entrepreneurs could grab this opportunity because of this. The entrepreneur should use all the digital media platforms to reach out to customers, explain them their products and create a huge customer base. They should think of new ways to reach their customers and built the base. Entrepreneurs should develop the strength to face the crisis. They must increase their efficiency so that they multiply their business after the end of this crisis.

Looking at the Mobile industry in India, They should increase their infrastructure and efficiency so that they can replace the Chinese Monopoly on smartphone production.  Apple Inc. has also suffered a huge problem due to this because out of Apple's 94 production units 12 and the most important once are in China which are closed down and no supply is possible from there.

Interest rates in the USA have turned nearly 0%, which was done to give a slight boost to the market. This meant the interest earned by depositors is nearly zero, which means very fewer people are interested to invest in banks in the USA. An entrepreneur in the USA thus gets a business loan on nearly 1-2% but in India, an entrepreneur will get a business loan at 13-17%. This is because the USA has a developed efficient equity culture, nearly 40-50% of Americans invest in equity-based products. This leads to very little investment in bank FDs so the interest rates are so less.

This is not the case in India. In India, most of the public investment is either in bank FD's or in physical gold. Therefore the interest rates are very high in India. This system locks the money and the liquidity reduces. People in India should start investing in equity-based investment products so that the young potential entrepreneurs of India will use this money fruitfully and boost the economy. Over the years only 5-7% of Indian investment is in equity. If at least 30% of Indian investment shifts to equity, then it will be a great boost for our economy specially in a present condition where Indian entrepreneurs need to grab this golden chance. 

According to the World Gold Council, Indian household has nearly 23000-24000 tons of physical gold which is lying idle. This means around 100 lakh cores rupees is not in the economic flow of investment. If even 30% of this gold comes out and gets invested in equity then the Indian economy will get a rapid boost.

The investors in India should start taking the risk of investing in equity, this will start an equity culture in India and then the Indian economy won’t get much affected due to such problems like Coronavirus. Coronavirus has brought a Life Time Opportunity for everyone in India let it be investors, manufacturers or entrepreneurs, the only need is to stop the panic and grab this opportunity wisely.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.


Tags assigned to this article:
coronavirus outbreak coronavirus pandemic economy

Mahendra Luniya

The author is Founder & CEO, Vighnaharta Gold

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