On Tuesday, 29 October 1929, the New York Stock Exchange opened under a cloud of fear. The market had been plummeting for the last five days and the brokers sensed that the worst was yet to come. They were not wrong. As the story goes, the opening bell of the exchange was never heard because the shouts of “Sell! Sell! Sell!” drowned it out.
Unlike the “Great Depression”, COVID-19 should not be deemed to have created economic hardship for businesses but for governments, yes. This is because the Great Depression and the COVD-19 situation are two different things. In this scenario, we know what is happening, business is put on hold to save lives.
The business slow-down during COVID-19 is temporal and will begin to revitalize after a couple of months. The greater of COVID-19 shock and panic have been absorbed by China, Italy, France and Spain, so all the others had sufficient time to mitigate both micro- and macro-economic losses.
It can be observed that during the upsurge of the COVID-19, investments in fixed assets in the most hit countries declined sharply and most on-going transactions suffered payment crises as the intermediate finance houses suspended lending. This can be understood for businesses within the sector, but for buyers, it is business as usual.
Retail business declined during the lock-down and will recover slowly because of a new culture and civilisation brought about by COVID-19. Social distancing norms are likely to reduce visits to malls and other major retail facilities, so retail outlets would have to adopt new systems of engaging customers through the increase in their ability to attend to customers seamlessly.
Businesses in the industrial production and export sectors will bounce back and many of them are likely to be overwhelmed by the volumes of business. To close the vacuum created by the lock-down, importers who could not get the goods delivered before the lock-down will be renewing their orders whilst new orders will be coming in from other customers.
India has reported more than 74,281 corona cases and 2,415 deaths. It has overtaken Canada as the 12th worst affected country, one spot below China where the virus originated.
Prime Minister Narendra Modi said the country should view the Covid-19 crisis as an opportunity to achieve economic self-reliance. In his address to the nation, he stressed on the importance of promoting “local” products. He called it Atmanirbhar Bharat Abhiyan (or Self-reliant India Mission) and said that in the days to come, his government will be unveiling the details of an economic package towards this aim, which, after including the earlier reliefs announced by Finance Minister Nirmala Sitharaman and the RBI, would be worth Rs 20 lakh crore — or 10 per cent of GDP in FY20.
According to the Centre for Monitoring Indian Economy Pvt. Ltd., India's unemployment rate fell to 24.6% from 27.1% in the week ended May 3rd. The Prime Minister, Modi, announced in his address to the nation that the government has planned new financial incentives in addition to those already announced. The combined package stands at ₹20 lakh crore (USD265,199,200,000). The package has been designed to keep in mind various segments of the society like small scale industries, cottage industries, labourers, farmers, middle-class taxpayers among others.
Business innovation will be a key factor in business resuscitation. Ethiopian Airlines having faced a sharp decline in passenger traffic, quickly converted 18 of its passenger aircraft into cargo planes. That simply means passenger carriage business has given way to massive growth in cargo haulage and is likely to influence future business travels.
Writer: Xenia S. N. Atidigah.