Coronavirus and its Impact on the Economy: exploring threats and opportunities
by Campusutra Online education -Best MBA Education PortalProf. Madhuri
Saripalle, Graduate School of Business, IFMR.
The world economy is facing one of its worst crises since a century.
Economies across the globe are seeing a sharp contraction in growth caused by
the economic lockdown to control the spread of the virus. This has led to a
supply shock, reduction in output, employment and consequently, demand. The
Indian economy was already facing serious structural issues and facing a downturn,
which probably have receded to the background with the more serious threat of
the pandemic at hand. Two important questions are: a) when will the economy
restart and what will be the sectoral response; b) what policy measures can
speed up the recovery process? It is also a time to reset the economy by
creating skills and improving productivity through innovation.
To address the first question,
as economies restart, there will be varied response across various sectors. For
example, industries such as essential goods and services such as drugs and
pharmaceuticals, essential health and financial services such as insurance,
production of essential foods such as pulses, etc, will see rapid growth, while
industries and services which are based on discretionary spend like
restaurants, entertainment, tourism will be hard hit. More detailed analysis
can be read here
and here.
The impact of economic slowdown is widespread because almost every sector is
dependent on trade and global supply chains. The pandemic is a double whammy on
an already existing slowdown in the economy, which is a an area of much more
serious concern.
In this article I will analyse
the structural imbalances in our trade sector which have got further amplified
with the pandemic and explore how these can be addressed.
Lack of
diversity in Trade basket-opportunity or threat?
In our trade basket, if we
exclude textiles, the exports and imports are concentrated in just a few
products. The top 5 commodities constitute 60-70 percent of total exports and
imports in India (table 1). It is time to create comparative advantage in
labour intensive sectors such as leather, sports goods and automotive
ancillaries to increase employment. The pandemic has given us an opportunity
wherein supply chains will be re-routed from the manufacturing engine of the
world-China to India so that we can prepare ourselves to skill our young
workforce and increase productivity in export-oriented sectors.
Table 1: Diversity in Trade basket in India
S.no. |
Commodities |
% Share in Exports |
% Share in Imports |
1 |
1 Mineral Fuels, Oils and
Products |
14 |
32 |
2 |
Gems and Jewellery |
12 |
12 |
3 |
Textiles |
10 |
1.4 |
4 |
Electrical Machinery and
Equipment |
5 |
11 |
5 |
Nuclear Reactors, Boilers and
parts |
7 |
9 |
6 |
Organic Chemicals |
6 |
4 |
7 |
Vehicles other than railway
or tramway |
5 |
1.1 |
8 |
Pharmaceutical Products |
5 |
0.5 |
|
Total |
63 |
71 |
|
Source: EXIM database. Ministry of
commerce, GOI |
Decline
in trade from November 2019:
When will green shoots emerge? The decline in exports and imports
started from November 2019 onwards when sectors such as jewellery, textiles, ores
and minerals registered fall in exports. Important sectors such as oil, coal,
iron and steel, transport equipment and electronic goods declined as well
reflecting decreased economic activity. During January-March 2020, with the
exception of ore exports and transport equipment imports (mostly railway and
locomotives, boats and floating structures), there has been a widespread
decline in trade due to supply chain disruptions. As countries emerge from
lockdown, there will be revival in economic activity and there should be enough
policy measures both on the supply as well as demand side simultaneously for a
balanced pick-up in economic activity.
Prof. Madhuri Saripalle short bio: Prof
Madhuri Saripalle has a doctorate in Economics from the University of Connecticut,
USA. Before joining IFMR, she was a faculty at the Madras School of Economics
and has also worked with leading business houses in Chennai such as TVS
Logistics and the Murugappa group of Industries.
Her research interests are on the contemporary issues in growth and
profitability in both industry and agri-business from the lens of applied
industrial organization. She has published her work in various national and
international journals such as World Development Perspectives, International
Journal of Automotive Technology and Management, and Economic and Political
Weekly. She has also conducted research projects on topics related to
employment in the manufacturing sector, environment friendly industrial
policies, sustainable farming practices and value chain in the horticulture
industry.
Sponsor Ads
Created on May 25th 2020 00:33. Viewed 374 times.