How is the economy impacted due to a pandemic like COVID 19?

A pandemic or shock events have a severe impact on almost every aspect of human life. Mankind has never seen such strong reactions ( lockdowns) to a killer virus in the past history except for a few pandemics there has been none like this that the world is prepared for. All the top leaders of the political fraternity were not sure of what was coming for them. We have never before attempted to shut down the modern global economy, much less reopen it in the setting of an ongoing pandemic.

COVID-19 has also revealed the true capability of all the governments.

The world could not react on time to avoid this danger. No one had prepared for any such calamity in reality. Of course, there are a lot of theories in the books about some of the worst disasters that killed a lot of living beings but still we have been able to defeat them.

But one thing we should not forget that the world has seen equally big pandemics in the past.

Some of the worst Past pandemics are:

• Spanish Flu: 1918–1920
• AIDS pandemic and epidemic: 1981-present day
• H1N1 Swine Flu pandemic: 2009–2010
• West African Ebola epidemic: 2014–2016
• Zika Virus epidemic: 2015-present day

Such events change the course of time & impact consumer behavior. People shed their old ways of working & adapt to new ones.

The Epidemic preparedness assessments summarise some of the key issues :

• Many countries, especially emerging markets, are not at all well equipped to detect, report, and respond to outbreaks.
• Weak or overwhelmed health infrastructure poses a great danger in containing the spread of infection.
• Slow growth in emerging markets may fail to absorb fast-growing workforces

The businesses are affected, with both near-term effects and less-expected longer-run consequences. Some macro trends are:

• Labour shortage: Due to strict lockdown in India the supply chain is strained to the breaking point. The policymakers must take steps to mitigate the acute labor shortage, in factories, in warehouses, in transportation, and in distribution.
• Drop at commodity prices: There’s a significant slowdown in the majority of the commodity markets. Plummeting fuel demand has forced refineries to work at reduced capacities. Precious and industrial metal prices to remain volatile over coronavirus sentiments in the market. Gold is a safe haven for all investors. It has experienced surging demand. But halt in mining activities and physical delivery is the challenge. Most of the agro commodities markets are seeing major impacts from short to mid-term supply and demand fundamentals
• The decline in consumption: Consumers continue to spend less & cut back on purchases. It’s expected that the spending power will decrease across categories except for groceries, entertainment, personal care & medicine.
• Supply Chain disruption: Some of the biggest FMCG and essentials producers are worried as lockdown continues. In an interview, Godrej Consumer Products MD Mr. Vivek Gambhir said labor constraint is the biggest challenge for production, transportation, and distribution. Old stocks have depleted & all the major manufacturing companies are operating at 30–40% of capacity. Parle Products, India’s largest biscuit manufacturer by volume is only operating at 15% of its total required labor force. Trains and buses must start operation to improve the situation. E-grocers, e-commerce players, and retailers said movement of supplies has improved but labor shortage can cripple supplies again.
• Cash Crunch: Severe cash flow deficiency which if not controlled in time might lead to the starving of emergency funds & force leaders to sell off assets to recover the cash. Thousands of cash-starved Indian small businesses & companies have resorted to pay-cuts or deferred the salaries altogether. Over 50% of lifestyle products such as carpets, handicrafts, and apparel exports have seen order cancellations. Delay in timely payments has led to growing receivables for the companies. Payment cycles have been overstretched.
• The decline in market share: For industry perspective, auto components, real estate, gems and jewelry, construction, airlines, textiles, poultry, and meat business will suffer the most, while pharma, telecom and direct to home players in media will be the least harmed
• Unemployment: India’s unemployment rate is now at a record high of 27.1%, according to the Centre for Monitoring the Indian Economy (CMIE).