COVID 19 & MACROECONOMICS Dr. T.K.S. Villalan Introduction - PowerPoint PPT Presentation

COVID – 19 & MACROECONOMICS Dr. T.K.S. Villalan

 Introduction  History of Pandemics  World and COVID – 19  COVID – 19 in India  Economic impacts of Pandemics before 1950  Changes in Global Environment after 1950 TOPICS FOR  Financial Crisis Vs COVID – 19 DISCUSSION  Macroeconomic picture of India before and after the COVID-19 pandemic  Impact of COVID-19 pandemic on World Economy  Policies for resolution  Is Keynes relevant today?  Conclusion

 COVID -19 is an infectious disease caused by a newly discovered coronavirus  Epidemiology – Wuhan – Seafood, live rabbit, snakes, bats and other animals.  Transmission – Human to Human – Droplets and fomites INTRODUCTION  Symptoms - Fever, dry cough, Headache, sore throat, Gastrointestinal symptoms, multiple organ dysfunction  However, Govt. of Tamil Nadu announced 85 % cases asymptomatic

 Existed since hunting stage of human kind  Earliest record Pandemic – Athens 430 B.C.  Antonine Plague – Began with Huns – 165 A.D.  Cyprian Plague – 250 A.D.  Justinian Plague – Palestine – 541 A.D.  Leprosy – Europe – 11 th Century WORLD HISTORY  Bubonic Plague – Asia – 1347 A.D. -  Smallpox, Measles – Caribbean – 1492 COMMUNICABLE  Pandemic around China and Hon Kong – 1855 DISEASE  Pandemic around Fiji – 1875  Russia Flu – 1889  Spanish Flu – 1918 – 50 Million deaths worldwide  Asian Flu – Mid 20 th Century  HIV/AIDS – 1981  SARS and EBOLA – 21 st Century

 On 31 st December 2019, Wuhan Municipal Health Commission, China, reported a cluster of cases of pneumonia in Wuhan, Hubei Province. A novel coronavirus was eventually identified COVID – 19  On March 11, 2020, after the first case of death in China on 17 th November, 2019, and the deaths around Europe AROUND THE and US, The World Health Organization announced that WORLD the COVID-19 Virus was officially a Pandemic after barrelling through 114 countries in months and infecting over one lakhs eighteen people.

 First case was reported on 30 th January 2020  PM announced lockdown for 21 days period on 24 th March 2020 to curb the spread of the virus  The lockdown was extended for nearly 70 days till 31 st COVID -19 IN May 2020 INDIA  As of 02 nd June 2020, the spread of COVID-19 in India was found on 1,98,706 persons  Maharashtra, Tamil Nadu, Gujarat are leading states in the spread of COVID – 19

 Economies were highly independent  Not integrated with other parts of the world  Except for Spanish flu 1918, other had larger causalities than economic issues  Recovery and achieving the earlier capacity was easier compared to intertwined economic systems of today MACROECONOMICS AND PANDEMICS  Establishment of GATT in 1948 – started to integrate the countries with the objective of increasing trade to BEFORE 1950 achieve higher equilibrium by reducing tariff rates.  GATT to World Trade Organization - From Globalization to Neoliberalism lead to a new dimension of highly interconnected global economy. - Globalism

 Before liberalisation, Agriculture contributed larger sum to the National Income of India  India opened its Economy - since 1990  Allowed its market to interact with global economic markets INDIA AND  Due to this phase of Information Technology and Interconnectedness, Indian Economy showed a positive GLOBALISM sign of economic growth  Today the Service Sector Contributes around 74 per cent to the national income of India  Since 2004 to 2012, Indian Economic Growth was quite significant and reached around double digit growth rate

 2008 financial crisis affected the world economies - the growth of global economy started shrinking  Some economies adjusted and maintained its growth rate and others not  China, US and other developed countries helped the developing countries to overcome from the Financial Crisis after 2008 FINANCIAL CRISIS  Still the impact of 2008 financial crisis is not yet over  Adding to the Crisis of Global Economy, the Pandemic VS Covid-19 further augmented the Economic Crises COVID – 19  Covid-19 started affecting largely the developed countries - China, US and other developed countries were largely PANDEMIC affected even before the Covid-19 Pandemic started  Unlike Financial Crisis, Developed Countries were passing on the blame between the East and West without helping each other  Politics dominated their objective than economic recovery and public health

 Agriculture sector shows a lesser growth rate  Manufacturing sector in negative side  Saving, Investment and Capital formation are on negative side MACRO ECONOMIC  Unemployment rate went to historically high. PICTURE OF INDIA  External Sector didn’t show improved performances PRIOR TO COVID-19 during this period. PANDEMIC  Exchange rate of Indian currency and the value of Indian currency is another issue  Banking Sector crisis

 False and wrong information given by the Government of India on GDP Statistics  Different pricing and tax system on oil in India compared to the other countries  Demonetization and the Introduction GST in a rash manner MACRO ECONOMIC PICTURE OF INDIA  Any government would look into fiscal measure PRIOR TO COVID-19 predominantly more and allow the Monetary sector to manage by the Reserve bank of India PANDEMIC  But the beginning of the day one, the present government took in charge, their concentration was only to intervene into the operations of the Reserve bank of India and this has resulted in a deep banking crisis

GDP GROWTH RATE GDP GROWTH AND EXPORTS EXPORTS

UNEMPLOYMENT RATE INFLATION – UNEMPLOYMENT INFLATION RATE IN INDIA

GOVT. SPENDING TO GDP GOVT SPENDING TO GDP – GOVT DEBT TO GOVT. DEBT TO GDP GDP OF INDIA

 Increase in Unemployment - nearly 50 percent  Lack of Income / Pay Cut  Return of Migrant Workers  Inability to operate the shop/ MSMEs in full capacity MACRO  Extending Lockdowns for Large Scale Units ECONOMIC  Reduction in interest rates makes savings and ISSUES SINCE THE investment less attractive COVID – 19  Increase in domestic violence and gender oriented PANDEMIC issues  Demand shortage for non-essential commodities  Inflation on essential commodities

 20 lakh crore Stimulus Package was announced  The package consisted worth 11 lakh and odd crores  Remaining part of packages – left out for RBI  Fiscal Stimulus and Monetary Stimulus do not have SOLUTION same effect in instigating demand OFFERED BY  Package consist more monetary measures than fiscal stimulus MINISTRY OF  Centralized vision and measures have less impact on FINANCE IN INDIA grassroots level  Non- disbursement of State’s share of GST acts as hurdle for State Governments  ADB estimates lockdown would take 2.3% of GDP

World GDP Growth Rate 4.299 4.5 4 3.5 3.197 3.132 3.058 2.857 2.835 3 2.655 2.585 2.508 2.5 GLOBAL 2 2010 2011 2012 2013 2014 2015 2016 2017 2018 MACRO ECONOMIC Trade (% of GDP) 60.58 60.54 61 PICTURE 60.1 59.78 60 59.44 59 58.09 58.07 58 57.13 57 56.13 56 55 54 2010 2011 2012 2013 2014 2015 2016 2017 2018

 Game changer for Global Economy  2020 and 2021 will be lost years for growth  “Economist” states recovery possible only in 2022  Lower Fiscal Revenue and higher social expenses GLOBAL requires extraordinary fiscal efforts MACRO  Public debt will increase sharply ECONOMIC  25 million jobs will be eradicated stated ILO PICTURE  30-40 percent downward pressure on global FDI (Projected by UNCTAD)  1.5 billion students out of school (Forecast by UNESCO)

 Trade policy is getting grimmer by the present period  The U.S.-China trade war has dominated headlines since President Trump took office  The US is pursuing autarkic solutions to substitute domestic production for imports  Demand crisis in the US Market US ECONOMIC  Issues of Unemployment crisis in US ISSUES  Student loan debt is one of the most critical issues facing U.S. AND (Around 45 million people are carrying a total of $1.49 trillion in student loan debt) GLOBAL  The healthcare debate is one of the most critical for ECONOMIES Americans who are unsure of the future of the Affordable Care Act or what might replace it (U.S. healthcare spending totalled $3.5 trillion in 2017, or more than $10,000 per person)  US attack on WHO sighting the connection with China  US financial support stopped to WHO

 Allies of 70 years, Germany and US are reportedly fighting over an American cross-border acquisition of German biotech firm, because the Trump Administration is casting it as a way to get a vaccine exclusively for US. OTHER GLOBAL  In Europe, the problems of Debt, since 2008 MACRO financial crisis and economies are in danger ECONOMIC except Germany doing better. Italy, spain and IMPACTS others too have largest impact of COVID on their Economies.  This pandemic affected much the Lating American countries.