The Impact of pandemic on global economy

Pandemic triggered economic upheaval, job losses, and shifts to digital, highlighting inequalities and reshaping global trade.

1. India’s real GDP decelerated to its lowest in over six years in 3Q 2019-20, and the outbreak of the COVID-19 posed fresh challenges. Steps taken to contain its spread, such as nationwide restrictions for 21 days and a complete lockdown of states, have brought economic activity to a standstill and could impact both consumption and investment. While Indian businesses, barring a few sectors, can possibly insulate themselves from the global supply chain disruption caused by the outbreak due to relatively lower reliance on intermediate imports, their exports to COVID-19 infected nations could take a hit. In sum, the three major contributors to GDP -- private consumption, investment and external trade -- will get affected. Private consumption The lock-down is likely to have a sizeable impact on the economy, most significantly on consumption, which is the biggest component.

2. Total imports, USD Bn Share in total imports, % The quarterly GDP growth has consistently fallen since Q4 of FY18. If there is a deviation in Q4 of FY19, as shown in the graph below, it is because the National Statistical Office (NSO) revised its data on February 28, 2020, drastically cutting down growth rates in the first three quarters of FY19 (from 8% to 7.1% for Q1; from 7% to 6.2% in Q2 and 6.6% to 5.6% in Q3).

3. Impact on the global economy Government efforts to extend credit terms for households and businesses may not come in time to avoid significant debt defaults The higher the debt levels the more costly and economically damaging social distancing is for an economy U.S. debt capital markets have seen significant strain as COVID-19 spreads globally Outflows from high-grade, high-yield and municipal bonds have been significant. Spreads for corporate bonds have widened hundreds of basis points. Additionally, treasury market strain is also being seen in ways that did not manifest during the global financial crisis of ’08.