Faizan Shah Malik
We are officially in Lockdown.
Call it a curfew or a lockdown or address it by any other name, the bottom line is that we are going to be staying home for the next 20 days or so, at least for now.
So as each day passes by, we are beginning to realize that this might be getting a lot worse than what we originally thought and it is this scary reality that we have to live with every day now and no one knows for how long.
However, we hope and pray that with all this social distancing (some mandatory, some not) that is happening almost across the globe, we will be able to flatten the curve sooner than later and we will be able to lower the spread of this virus and bring it down to a manageable level where we can get back to our normal day to day routine.
Hence, with the passage of time it will surely bring with it a host of issues and problems to our doorsteps and to our homes and into our minds, and one of them is the psychological and emotional toll that it will have on almost an entire population, which in my opinion is currently being underestimated or overlooked.
Having lived through it, in a somewhat similar situation very recently in Kashmir since and over the years, I can say this with a degree of certainty that it will be widespread, it will be substantial and a lot of people will need a lot of help for varied degrees of mental, emotional & psychological trauma that they will go through, for a variety of reasons and one of the most prominent reason among those will be purely economical.
Lot of people will lose their livelihood. Some people will lose their jobs, others will lose their businesses, bankruptcies and insolvencies will increase and when people won’t be able to pay their bills, the emotional trauma of that will be enormous in itself.
It looks like the worst case scenario is unimaginable and we really cannot or do not want to even fathom it, just because it seems so improbable and implausible right now, we tend to ignore what that reality might look like.
But with each passing day the subconscious mind is beginning to transform and give some verisimilitude to what very recently just looked like a figment of our imagination.
So the governments across the globe will need to prepare for this inevitable, this catastrophe that seems to befall upon us in the not so distant future.
And India is no different, in fact India is a lot more vulnerable given its population size and density especially in the metros.
As Governments across the world are announcing all sorts of financial packages to help them weather this storm and keep their economies afloat, India is yet to announce anything substantial.
The US senate passed a big economic stimulus of around 2 trillion dollars a few days back, which includes sending checks to individuals and bail out packages for big industries as well as for small businesses. While some governments are debating on the packages, some have already announced, people across the globe are getting jittery and scared. Will I lose my job? How will I pay my rent? How will I make my payments? Will the government assistance be enough? There are numerous other questions that are cropping up in people’s minds, and they are looking up to the government for answers and solutions.
So the government needs to step up and assure people and come up with a package that keeps us all afloat till we get back on track once the dust settles.
Luckily, India has so far had a lot less confirmed cases of the Covid-19. Is that because of lack of testing or are we behind the curve by a few weeks to the other countries, all this remains to be seen and we will know soon enough.
As we brace ourselves for the economic impact of this, the government needs to address this sooner than later.
India finds itself in a rather precarious position with the Stock market which was soaring just a few months back, hit all time high and was making new highs every week, has now dropped almost over 35% of its value from its recent highs and is now back at 2016 levels.
However, the stock market does not always reflect the true state of the economy in a country. As we have seen in India, GDP growth rate has been falling in the past 1-2 years with growth falling from upwards of 7% to around 4.5% now. The slowest it has grown since Q1 of 2013.
Besides other factors, demonetization hurt the economy badly as it dealt a crushing blow to the unorganized sector which is primarily cash based and accounts for over 90% of the India’s economy.
With India announcing lockdown for 21 days, economic impact of this shutdown will be enormous. As we brace ourselves for the rough road ahead, we need the government to come up with solutions and announce some major relief measures in form of economic packages or waivers that takes care of the poor as well as the middle class of this country as they will bear the brunt of this catastrophe that seems inevitable now.
Because we might be in this for long haul and we probably need more help from the government in the later months as well, when this thing hits its peak, which hopefully will be sooner than later, we don’t want them to have dealt all their cards now and have nothing left in tank for later. So anything they come up needs to address the current situation and have in mind the worst hasn’t come yet.
We need both relaxation on monetary policy front and strong fiscal measures to help the economy move forward because the headwinds that we are going to face will be strong and we will need all the help we can get.
They can just borrow (at the low interest rates now) and shore up the economy and come up with a package much bigger than anyone is thinking about. They can surely afford a larger fiscal deficit now but they can’t afford an economy that is totally destroyed and then cannot be fixed quickly.
Once we see the government comes up with something on the economic front, the mental aspect of this needs to be addressed as well, and that it should not be taken lightly. We hope to hear from the government on both fronts very soon.
Faizan Shah Malik is MA in Economics & MBA from University of Texas, Arlington. He is currently working as a Freelance Investment Advisor, Futures & Commodities trader.
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