Today, the whole world is connected by the economic processes of Liberalization, Globalization, and Privatization. A small change in any part of the world results in changes in the world. This change could be economical like changes in the stock markets, natural like when any calamity takes place, or biological when any disease spreads. As we all know today, COVID 19 is spreading all over the world. It has been declared a global pandemic. This virus spreads through touch. It is an undesirable biological change that has a lot of impacts on the global economy. A minute change in the demand and supply disturbs the equilibrium of the economy. COVID 19 has lead to a fall in the price of shares of companies. So, here are some of the impacts of Coronavirus on the global economy.
1. Fall in the Demand for Luxuries- COVID 19 has reduced the demand for luxurious goods in the global economy. People are not willing to go out of their homes to purchase those goods. In many places, curfew has been imposed. The demand for goods like air conditioners, jewellery and other luxurious goods has fallen. Prices of shares of companies supplying luxurious goods have reduced. This has contributed to a huge loss in the profits of thousands of firms.
2. Rapid Increase in the Demand for Necessities- Coronavirus outbreak has lead to an expansion in the demand for necessary goods. There was a deficit in the market for some goods like hand sanitizers and masks. Curfew has been imposed by governments in many countries of the world. This made people purchase a great amount of necessary goods like pulses, rice, flour, and other grocery items. People have hoarded quantities of necessary goods to ensure that they stay in their houses and do not go outside for any reason. Panic buying is on the rise.
3. Increase in the Inventories of Firms- Inventory of a firm refers to the stock of unsold finished goods. Due to COVID 19, the demand for thousands of goods has reduced. Hence, the inventories of the firms have increased leading to a great fall in their profits. Many shopkeepers are in trouble because their sales have reduced leading to a fall in their income.
4. Fall in the GDP – COVID 19 outbreak will lead to a fall in the GDP of countries. GDP or Gross Domestic Product is the market value of all the goods and services produced in any country during a fiscal year. GDP is the best measure of economic activities in countries. Since the production of goods and services is not taking place, it will result in a fall in the GDP of countries.
5. An Increase in the Unemployment- Coronavirus outbreak will increase the unemployment rate. Governments of various countries are not allowing people to work outside or come out of their houses. Due to this reason, the poor strata of the society that is the daily wage labourers will be unemployed and their income source will collapse. However, Narendra Modi advised all the citizens to not cut the daily wages of workers who work in homes.
6. Fall in Investments- COVID 19 will also reduce the investment spending of firms and companies. In the long run, this may result in a fall in the interest rates because financial intermediaries like banks, etc. work on the money which other people invest. Overall, it will lead to the benefits reaped by investors as well as financial intermediaries.
These are some of the important implications of the Coronavirus outbreak. It will reduce the demand for luxuries and expand the demand for necessities. People have been told not to go out of their houses to work or for any reason. Since there is a fall in the demand for goods, inventories of the firms will increase. Falls in the GDP will also there due to this outbreak.
Daily wage labourers will become unemployed leading to an increase in the unemployment rate. There will be a fall in the investment expenditure by the people, which might result in a fall in the interest rates. We request you all to stay at your houses and utilize this precious time with your family.
Written By: Vaibhav Sharma
Edited By: Kashish Chadha
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