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COVID 19 has stabbed our Economy. The world has stopped, interest rates tending zero and GPD growth rate has already dropped below zero. Our economy is striving for it’s live. Will it revive? Can we reboot our economic system? Let’s take a look.
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History of Pandemics and Epidemics
| S.No. Rank | Pandemics & Epidemics | Disease | Death count | Year | Geographical Location |
| 1 | Black Death | Bubonic plague | 75–200 million | 1346–1353 | Europe, Asia, and North Africa |
| 2 | Spanish flu | Influenza A – H1N1 | 17–100 million | 1918–1920 | Worldwide |
| 3 | Plague of Justinian | Bubonic plague | 15–100 million | 541–549 | Europe and West Asia |
| 4 | HIV/AIDS pandemic | HIV/AIDS | 35 million+ (as of 2018) | 1981–present | Worldwide |
| 5 | Third plague pandemic | Plague | 12–15 million | 1855–1960 | Worldwide |
| 6 | Cocoliztli Epidemic | Cocoliztli | 5–15 million | 1545–1548 | Mexico |
| 7 | Antonine Plague | Smallpox or measles | 5–10 million | 165–180 | Roman Empire |
| 8 | Mexico smallpox epidemic | Smallpox | 5–8 million | 1519–1520 | Mexico |
| 9 | Russia typhus epidemic | Typhus | 2–3 million | 1918–1922 | Russia |
| 10 | COVID 19 pandemic | COVID 19 | 3.7 million+ still increasing at an increasing rate | 2019 – present | Worldwide |
It is not the first time that mother earth is suffering a pandemic. We have had it before, and we survived. Holding on to that hope, let’s look at the chart mentioned. The economy rebooted during the black death, Spanish flu, and plague. So, statistically, we have possibilities this time too.
COVID 19 scenario
COVID 19 originated in Wuhan, China, in 2019 December. Ever since the world witnessed is a rapid spread of the disease. It pushed the world towards a health crisis. It originated as a disease in bats, which was transmitted to humans via the respiratory system. The World Health Organization coined the term COVID 19 and declared this novel coronavirus disease as a pandemic on March 11, 2020. The virus is highly contagious, and the incubation period ranges between 2-14 days.
COVID 19 and Indian Unemployment
The life-threatening spread of the novel coronavirus imposed worldwide lockdown. Domestic production houses suffered so did international trade. The unemployment rate rose, so did inflation. The table below displays the unemployment rate in India over the months.
Indian Unemployment Rate during the Corona Pandemic
| Month | India | Urban | Rural |
|---|---|---|---|
| May 2021 | 11.90 | 14.73 | 10.63 |
| Apr 2021 | 7.97 | 9.78 | 7.13 |
| Mar 2021 | 6.50 | 7.27 | 6.15 |
| Feb 2021 | 6.89 | 6.99 | 6.85 |
| Jan 2021 | 6.52 | 8.09 | 5.81 |
| Dec 2020 | 9.06 | 8.84 | 9.15 |
| Nov 2020 | 6.50 | 7.07 | 6.24 |
| Oct 2020 | 7.02 | 7.18 | 6.95 |
| Sep 2020 | 6.68 | 8.45 | 5.88 |
| Aug 2020 | 8.35 | 9.83 | 7.65 |
| Jul 2020 | 7.40 | 9.37 | 6.51 |
| Jun 2020 | 10.18 | 11.68 | 9.49 |
Just like an android/IOS software update each year we are witnessing a new variant of COVD 19. Most companies and institutions have adapted to the ongoing situation. They have shut down the physical operational modes and adopted the virtual mode. Work from home is the new normal. However, the old argument where robots take away human jobs again creeps in. People who could not adapt to the virtual working models were sagged and replaced by bots. But, this is a topic we can discuss later.
The revival of Economy
As we know, life goes on. Even though the loss to the economy is huge and unemployment chaos caused by COVID 19 is immense, the economy will definitely revive. When we could revive and bloom from the previous pandemic shocks that were severe than SARS COVID. Hence, it is normal to say, even though the situation seems frightening, the economy will return to the mundane soon.
Let us take a look at the U-shaped economy curve. In the first half of the curve, we see a downward slope. It represents the lockdown, critical economy health, stagflation i.e. inflation plus unemployment, etc. The trough or the bottom of the curve is the lowest point where the economy can drop no further. This is the point from where the economy will start reviving. The economy will enter complete unlocked situations, health will improve, stagflation will slowly move towards healthy inflation that will create employment opportunities.
The question that should bother us is when will it revive and not will it revive?!
The below is just a visual representation of what I assume will happen. The orange downward sloping graph represents increasing COVID 19 cases. Higher the COVID cases, lower the economic activities (lockdown). The closing down of economic activities negatively affects the economy. However, as the saying goes ‘where there is a will, there is a way’; people will figure alternative ways to run the economy such as online classes, work from home software, self-help healthcare kits, so on. As the economy adapts to the COVID chaos, the GDP revives itself. This is represented by the green upward sloping curve.
Let’s understand the graph. Point E is the ideal economic state (or equilibrium point). On the left-hand side of point E (such as GDP1), the COVID 19 cases are higher than people’s ability to adapt. Whereas, on the right-hand side of point E, people’s ability to adapt is higher than in the COVID cases. As we know a locked-down economy has lower COVID cases along with lower freedoms too. Hence, GDP2 cannot be an ideal economic state where the freedom of the citizens is compromised. Thus, the economy will experience another external shock and force us to move to point E.
Even though, GDP2 > GDP*, it is suboptimal since the freedom of the citizens are compromised. A compromised situation always has lower welfare. Once, we reach point E i.e. a proper balance between COVID cases and adaptation to the COVID economy, the economy will start flourishing.
CONCLUSION
The economy has witnessed deaths, job loss, education crises, healthcare emergencies since 2019 end. All we can do is hope for a better situation this year. Wear your masks, maintain social distance, follow COVID norms and stay protected. Get yourself jabbed, and consult a doctor at the slightest symptoms. COVID 19 is here to stay with new variants now and then. It is our duty to stay safe and keep others safe too.
