The government is all set to announce another round of relief measures for corporate India targeted at specific sectors that were worst hit by the pandemic and lockdown.
- By Ravi Singh
Coronavirus is unwilling to subside. The number of confirmed cases exceeds 1 million globally with more than 70,000 deaths. Governments across the world are struggling to contain the spread. Even though the cases reported from China have peaked and are now falling, cases from other countries – which were thought to be resilient due to high medical standards – are continuously rising. The United States, Italy and Spain have recorded by far the most number of confirmed cases and deaths. To deal with already stretched medical systems and the looming shortage of medical supplies, governments are imposing restrictions on the free movement of the public to contain the further spread of the virus.
These measures are having a very deep economic impact. While the data to assess the real economic impact is still under process, initial reading from some of the major economies is worrisome. One such alarming statistic is skyrocketing weekly jobless claims number of the US, which came in at 6.6 mn, second highest after 6.95 mn reported in 1982. Major stock markets around the world saw a wealth erosion of nearly 30% between Feb 20 and March 30.
IMF suggested that global growth has fallen below 2.5% this year and will only grow by the rate of 1.5% with G20 is expected to see a GDP growth of 3.5% in 2020. Given the fast-moving nature of the crisis and fast reaction from governments, economic forecasting has become a strenuous job and should be looked upon with skepticism. For instance, Moody’s ratings which pegged India’s 2020 growth at 5.3 on March 17 further brought it down to 2.5% within 2 weeks. OECD suspended its March release of global leading composite indicators.
Another major lead indicator of the ensuing global economic crisis is the crude oil prices, which went into free fall (Brent crude went below $25 a barrel) as the virus breakout was spreading deep into the globe. The container throughput index, which measures the traffic at major global ports reported a sharpest ever 10 points to 102.5 from 113.4 in January (it was revised downwards by 2.2 points). RWI/Institute of Shipping Economics and Logistics, which releases the index statistics, is of the view that coronavirus will show its true impact on the global trade on April 30, 2020, when it releases its March data.
While India responded early to implement social distancing by imposing lockdown, experts are of the view that currently India is in the second or third stage of the breakout. As it nears the 14-day lockdown, there is a lack of clarity on whether to lift the lockdown, if yes how and to what extent. While a section of authorities are urging to extend the lockdown till April-end, it is likely to have a very deep impact on the economy with uncertainty on when and how it will reach normalcy. While the government and RBI have already announced relief measures to ease liquidity in the system and to give relief to the needy, media sources indicate that the government is all set to announce another round of relief measures for corporate India targeted at specific sectors that were worst hit by the pandemic and lockdown.
(Ravi Singh is VP- Research Head, Karvy Stock Brokings. The views shared are the author’s own.)