COVID 19 - Is economic revival possible?

The deadly and highly contagious SARS-CoV-2 or Covid 19 virus was first been identified in December, 2019 in the Wuhan province of China. With over 350,000 deaths and about 5.6 million infected, this has become the largest and most deadly pandemic in recent times

The COVID 19 pandemic has affected some of major economies like US, UK, Italy France and Spain. As of today, these 5 countries seem to be the worst affected in terms of mortalities with over 250,000 deaths. India, has also become the 9th most affected nations in terms of number of infections with over 170,000 confirmed cases, 82,000 recoveries and 4900 deaths.

While many claims emerged of drugs which could potentially treat the virus, a definite proven cure and vaccine remains elusive. Nonetheless, scientists across the globe have started working in unprecedented speed to develop a vaccine. As of today, nearly 100 potential vaccines are at various stages of trial to combat the novel coronavirus. 

However, till the time a vaccine or cure is found, major economies have turned to the principles of epidemiology to contain the spread of the virus. Since, the last 2 months India has been under a complete lockdown with a few relaxations. Even in the green /orange zones activities like malls, gyms, restaurants etc. have been disallowed. Most of the economic activities in the Red/ Containment zones have been disallowed. Officials are of the firm opinion that the lockdown was necessary for 2 things:

1.       Contain the spread or flatten the curve (Increased doubling time and reduced R0)

2.      Build public health buffer

This lockdown however has not been without economic cost. After close to 62 days of lockdown, governments and bureaucrats are facing the twin problem of “containing spread without impeding economic growth”. Along with the human suffering, this pandemic has globally caused widespread economic damage the likes of which the world has not yet seen.

The International Monetary Fund (IMF) has revised the global GDP growth estimate from 3.35 to -3% within just 3 months of the crisis. This roughly translates to de-growth of 3% from pre-COVID GDP levels. As per a few economists, this is something that the world hadn’t seen since the Great depression of 1930s. GDP forecast of almost of the major countries have been revised to marginal or sub-zero levels.

As per experts, Airline, Hotels, Auto, CAB aggregators, Retail giants, and Real estate could be among the worst hit sectors. Moreover, the fact that some of these sectors were already reeling under liquidity pressure before covid, could aggravate matters further. We are already hearing news of layoffs and salary cuts from some of the major players within these sector.

?      Uber has already laid off 600 people in India and about 7000 globally

?      Technology unicorns like Airbnb & OYO have already laid off quite a few employees and it keeps getting worse

Whether a blanket lockdown (which was the longest and most stringent) was required for a country like India is a discussion from some other time. However, it may not be all gloom and doom as there might be light at the end of the tunnel.

The first reason is Economic Sensibility – Countries are all lifting the lockdown as we have more insights into the virus including the average mortality rate. Additionally with social distancing, better hygiene and digitization people are gradually learning to live with it. While I agree that it may never be the same it also does not imply economic stagnation. In my opinion, it will change much of what or how we do things today resulting in an economy which is much more agile and digitally ingrained.

Economic recovery in my opinion will happen and we may revert to pre-covid levels sooner than we expect with pent up demand driving up consumption in the short term. As per CRISIL, the Indian economy may reach pre-covid levels in 2-3 years, but experts are also of the opinion that we may emerge out of this much sooner.

We could witness a plethora of opportunities that may open-up in a post-COVID 19 world. Just imagine how much companies would focus on digital transformation. Simple things like grocery shopping, watching movies, or going out to eat in our favourite restaurants will not be so simple anymore. In fact, our day to day lives will be turned completely upside down. With digital taking up such a big part in our lives, there may be tremendous opportunities in the field of Ecommerce & Digital Marketing. Just imagine the copious amounts of data it will generate and with so much of customer data opportunities in analytics and data science will only rise.

With work-from-home and staying indoors becoming the norm, we may see a surge in demand for organized retail. This however could be detrimental to as smaller retailers as they may not have the requisite infrastructure for competing in the organized retail landscape. However, growth in organized retail will create considerable employment opportunities especially in the field of supply chain & operations.

Long story short I strongly feel that despite the doomsday noise that is being made by many of the self-appointed industry pundits we will rise stronger than ever. Of course these 2 months have been tough and worse isn’t over, but the optimistic me would still like to believe that we will overcome this crisis slowly but surely.