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Covid-19: When The World Hit Pause
Covid-19 spreads fast and wide, wreaking havoc across the globe. What lies ahead for the world and India?
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In December 2019, the World Health Organisation (WHO) was informed of mysterious pneumonia cases emerging in China. These initial 41 victims of the disease it was found, had had some sort of contact with the Huanan Seafood Wholesale market – a live animal and seafood market in Wuhan, China. Close to 30 samples lifted from the market for testing indicated the presence of the novel coronavirus disease subsequently.
The market was closed on January 1, 2020. With cases starting to show up beyond China, the WHO declared a global public-health emergency towards the end of January 2020. What came after that can be likened to the scariest horror movie that Hollywood has ever produced.
When initial efforts by governments and states to curb the spread of this deadly virus yielded nothing, they opted for a total lockdown. All movement was stalled and the world literally hit the pause button. Offices were ordered shut, industrial activity got constrained, travel was restricted and the once bustling cities began to resemble ghost towns.
Top G7 leaders held an emergency call to discuss steps to contain the destruction caused by the novel coronavirus. There were concerns that the pandemic could push some countries into recession. Finance ministers of the G7 Group said, “Given the potential impacts of COVID-19 on global growth, we reaffirm our commitment to use all appropriate policy tools to achieve strong, sustainable growth and safeguard against downside risks.” They mentioned that they would take fiscal measures where needed to support the economy.
Global markets have begun to feel the pressure of the disruptive virus. Around the middle of March, the Dow Jones plunged 10 per cent, registering its worst fall since Black Monday in October 1987. In addition, the UK’s FTSE 100, France’s CAC 40 and Germany’s DAX plunged on fears of the impact of the coronavirus.
A price war erupted in the oil market between Russia and Saudi Arabia, which flooded the market with barrels of crude oil and ended the OPEC plus alliance. Demand has gone down tremendously because of travel restrictions, which will further impact the oil sector in the coming months.
Impact on India
At home in India, the scenario has been equally gloomy. India entered a 21-day lockdown on 24 March to contain the spread of the virus. While essentials will be available, the attempt is to enforce strict social distancing, which has emerged as one of the only methods to keep the deadly disease at bay. In his address, Prime Minister Narendra Modi has said that while there was an economic cost to the lockdown, saving lives was the government’s prime focus. Prioritising healthcare, the central government announced an allocation of Rs 15,000 crores towards strengthening the national medical infrastructure.
Union Finance Minister Nirmala Sitharaman announced relief measures for corporates, taxpayers, businessmen and individuals too. The industry response was almost instantaneous. “We appreciate the proactive and combative measures undertaken by the Hon’ble Minister for a sustained economic health, like extending the last date of filing the Income tax returns for the Financial Year 2018 - 19 to 30th June 2020, reducing the interest rate for delayed payments to nine per cent from 12 per cent for delayed payments; extension provided to the Vivaad se Vishwas Scheme till the 30th June 2020 and no interest, penalty and late fee to be charged for companies with a turnover of less than Rs 5 crore, among others,” said D. K. Aggarwal, President, PHD Chamber of Commerce and Industry.
According to the FICCI (Federation of Indian Chambers of Commerce and Industry) report on the impact of COVID-19 on the Indian economy, the pandemic will potentially derail India’s growth story by affecting both the demand and the supply side. It states that in the third quarter of the current fiscal, the economy grew at a sluggish 4.7 per cent, the last quarter was promising, but the coronavirus outbreak has proved to be a dampener.
On the pandemic’s impact on the financial market, the report highlights 12 March. “Following the trend of the global equity markets, both the BSE Sensex and NSE Nifty crashed by more than 8% in a single day.’ INR 10 lakh crore was reportedly wiped off due to this single day shock,” it says, adding, “19 March was another shocker for the market, which plunged again, Sensex closed 581 points lower at 28,288 and Nifty fell 205 points to end at 8,263.”
Fallout On Economy
Disruptions in the economy are evident already. Tourism, hospitality and aviation were the first and most severely affected sectors, as airlines stopped operations. Not counting the panic hoarding of home essentials and sanitisers – consumer confidence is at an all-time low and is likely to reflect in a decline in consumption levels in the months ahead.
Automobiles, electronics, pharmaceuticals, and chemical products etc. are facing component and raw material shortages. The work-from-home scenario is further adversely impacting certain sectors such as manufacturing, which require employees to be physically present. An Asian Development Bank report has estimated that the Covid-19 outbreak could cost the Indian economy between $387 million and $29.9 billion in personal consumption losses.
The FICCI conducted a survey among industry members to assess the impact of the pandemic on businesses. The findings suggest that slowing economic activity had brought down cash flows of businesses, which in turn has an impact on payments of employees, interest earnings, loan repayments and taxes. As many as 80 per cent of organisations reported a decrease in cash flow. More than 60 per cent of the respondents indicated that their supply chains had been affected.
On March 26 Union Finance Minister Nirmala Sitharaman announced an economic stimulus package of Rs 1.76 lakh crore in the way of cash and food security benefits for migrant workers and the rural and urban poor. More measures are expected to fight the downturn induced by the pandemic. Even though it is a gloomy situation, we can take heart from the fact that the world has come together at last – even if it to combat a deadly disease.
COVID- 19: UPDATES FROM AROUND THE WORLD
As many as 719 coronavirus cases werereported around India as of 26 March, Kerala and Maharashtra being the worst hit. A nationwide lockdown came into force on the midnight of 24 March. On 26 March, Finance Minister Nirmala Sitharaman announced an economic package worth Rs 1.76 lakh crore, comprising both cash transfer and food security for the urban and rural poor.
THE UNITED KINGDOM
The UK announced strict measures to tackle the spread of coronavirus, banning gatherings of more than two people. Till 26 March, 477 people died in the UK. On 23 March, PM Boris Johnson said the nation faced a “moment of national emergency” and urged people to stay home.
On 23 March, US President Donald Trump suggested that the economic shutdown meant to curb the spread of coronavirus would not be extended. Trump said, “America will again and soon be open for business.” He al suggested that the response to the virus may be exaggerated. As many as 69,425 Covid -19 cases and 1,042 deaths, had been reported around the US by then.
Till March 26, Italy reported 7,503 deaths from Covid-19. By then its nationwide lockdown was in the third week.
While the world is working to contain the deadly coronavirus outbreak, North Korea claims to have no cases at all. Reports say experts in South Korea were sceptical of these claims and some sources believe that the country is in reality impacted by the virus.
As of 26 March, China reported 81,285 cases. With new cases going down significantly, travel restrictions are scheduled to resume in Hubei Province by 8 April.
As of 26 March, The United Arab Emirates reported 333 cases. The UAE urged its citizens to avoid unnecessary travel and announced strict measures against those who did not comply with the safety measures.
* On March 24 global markets surge after the US Federal Reserve promises support. Markets in Europe and Asia record strong performance as well.
* G20 countries to inject $5 trillion into the global economy to combat the Covid-19 pandemic.
* Confirmed Covid-19 cases around the globe: 499,952
* 22,327 confirmed deaths
* 198 countries, areas or territories impacted by the pandemic
* On December 31, 2019 cases of pneumonia detected in Wuhan, China
* WHO declares the outbreak a Public Health Emergency of international concern on January 30, 2020
* On February 11, 2020, WHO announces a name for the new coronavirus disease: Covid-19
* The IOC on 23 March says that the 2020 Olympic Games will be postponed because of the novel coronavirus
* Figures & Data as of 26 March, 2020