As things are going now, in case the virus is not contained in the next 2 months, I feel that the financial need for emerging markets could be in excess of this $2.5 trillion projected.

International Monetary Fund (IMF) recently gave a verdict that the coronavirus crisis has caused a global recession. IMF estimates the overall financial needs of emerging markets at $2.5 trillion. There is recovery projected in 2021, only if the virus can be contained. As things are going now, in case the virus is not contained in the next 2 months, I feel that the financial need for emerging markets could be in excess of this $2.5 trillion projected.

The outbreak has already brought considerable human suffering and major economic disruption. And, as per OECD Economic outlook data, global growth could drop to 1½ percent in 2020, half the rate projected prior to the virus. The rapid spread is dampening both global and Indian economic revival efforts. This sudden economic stop is leading to both concern and apprehension as more and more countries are going into a total lockdown to manage and mitigate the impact of coronavirus. There is questions and doubts - Will jobs continue to exist? Will furloughs become common? Will there be salary cuts?

While globally there have been appeals to act more humane in these testing times including from our own government where advisories by Ministry of Labour and Employment have asked employers not to cut salaries or resort to the layoff of their employees, the reality may be different.

A recent UN report estimated the trade impact of the coronavirus epidemic for India at $348 million and added that it is among the top 15 economies most affected by the outbreak. If the disruption is prolonged it could have a bearing on India’s imports from the countries which are critical for domestic economic activity. Sectors such as the Tourism and hospitality industry in India could render 3.8 crore people jobless which is a substantial part of the total workforce. GoAir and Indigo have already cut salaries across the board following a suspension of operations. The auto and electronic industries are facing supply chain disruptions that could result in a lower or zero hikes across the sector. The economic impacts of the lockdown are beginning to be felt and will escalate in the coming months.

Ashwajit Singh, MD, IPE Global acknowledges that even, consultancy firms have been affected by Covid-19 related slowdown. He says, “Nearly all our client companies have halted the key strategic and ongoing projects, which, in turn, has affected our payment schedules.” However, he assures that in the current situation no jobs will be lost, or salaries cut or delayed.” With regards to the new appraisal cycle, promotions and bonuses, he says, “we are still evaluating our options. Though there is a freeze on new hires, we will honour those who were offered a job prior to this crisis but, their joining may be delayed.”

However, it may be noted that while the formal sector is able to voice their concerns with the government and ask for more incentives and bailout packages, the bulk of job losses may be in the informal sector. According to the ILO, 61.2 percent of all employment in 2018 was informal. Unlike developed countries, nearly 70 % of the workforce in developing countries is in the informal sector.

According to Ashwajit, the initial bailout packages announced by the Government are mainly aimed at covering the common man and especially those below Below Poverty Line (BPL). Direct transfers and food security are good measures in the short run aimed at immediate survival, but medium to long term measures are required to sustain the economy, improve cash flows and protect jobs. The hardship on migrant & temporary labor has already been witnessed. The most vulnerable to any economic crisis such as the present could even mean that more people could die from hunger than the virus.

The Government needs to quickly announce measures to protect jobs and ensure that the private sector especially the small and medium businesses are able to survive. Some of the economic reforms announced are for medium to long term revival. However, there is a need to immediately get cash in the hands of the private sector to enable them to pay salaries and survive. The biggest buyer of goods and services is the Government (national, state, local) and PSUs. It is critical for the Government to immediately pay all their creditors which would infuse a substantial amount of funds in the system to enable the private sector to have a better cash flow and pay salaries and vendors. This is a simple measure where the Governments are not infusing additional funds from their budget but only meeting their due obligation. This has already been announced in Sri Lanka.

But all may not be lost. Amidst all this is, there may be a silver lining for India as the Corona threat continues. As per a recent report in the Economic Times, global buyers are seeing India as China's replacement to source ceramics, homeware, fashion and lifestyle goods, textiles, engineering goods and furniture.

While concluding Mr. Singh does acknowledge that Covid-19 is likely to have an adverse economic impact on the world economy and lauds the government effort to control the rising instances of Corona in the country. But, he feels that an optimistic approach for “a pandemic such as this needs a humane approach and a behavior shift at all levels to be able to minimize the impacts on public health and the economy.”

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house