By Dr. Manju Dagar
The new manmade disaster is the talk of the town now, yes, I am talking about Covid-19 Coronavirus, and the speed at which this virus is spreading in the world had not been seen during the crisis of Ebola or Zika virus. It has started showing footprints in India and rapidly spreading in Asia. The death toll rising every day due to Coronavirus across the Globe, starting first death from China. Due to the rapid increase in the number of Coronavirus Patients, the Indian Government issues a stunning warning by putting all airports including seaport on check with physical checking and also using the thermal scanner on arrival. The medical warning has been issued by almost all Counties hitting the regular flow of Business. Hence, COVID 19 Coronavirus, successful in making a heavy impact on the economy of the host country, spreading all bull markets to ‘RED’.
Ajay Kumar chairman of Fox Petroleum Group of Companies. His main business region is in Gulf Countries but apart from this, Fox Petroleum already spread its wings worldwide more than 15 countries. So he is the right man to ask economic impact worldwide, He speaks to Our international journalist Dr. Manju Dagar. The conversation was about how Corona COVID 19 Virus may Impact the global economy.
Question: What is the geopolitical Impact of Covid-19 Coronavirus to the world Business inc? What Coronavirus Could connote for the Global Economy?
Dr. Ajay: As such not so high fear in Business Inc amid that almost all Government is taking care of it, but internally there is the fear of long term disruption of supply chain management may lead to a serious recession. This will impact hard. This is the fear, as the World Economy is interdependent to each other’s economy, due to globalization. Just one hit in China means hit on 28 Countries at the same time.
As I got the sense from business leaders, they are asking whether the market drawdown truly signals a recession, and the fear is how bad a Covid-19 recession would be, what the circumstances are for growth and recovery, and whether there will be any lasting structural impact from the unfolding crisis. For them, I have a silent answer, already a Trillion dollar business is hit. It’s going to be worst, if it gets a longer duration, there is odd suspense of Countries that may see a recession, but mostly those are highly dependent on the Chinese market.
Question: Dr. Kumar As you have used the word “Recession”? What Would a Covid-19- stimulated Recession Look Like? Is it going to hit China or the world market?
Dr. Ajay Kumar: “Recession” is a flaming world for the market. Though market sentiment can be misleading, recessionary risk is real. The vulnerability is countries are now less able to absorb shocks due already slow down in the Global Economy. In fact, an exogenous shock hitting the U.S. economy at a time of vulnerability has been the most believable recessionary scenario for some time. Before the shock let me tell you categories of recession. Recessions typically fall into one of three categories; they can be understood by the following examples:
Factual Recession. Naturally, this is a CapEx boom cycle that turns to bust and derails the expansion means it hits the capital market. But severe exogenous demand and supply shocks — such as wars, disasters, or other disruptions — can also push the real economy into a contraction, and yes it is natural disaster and that to man-made, and my source or information said the even US needs minimum one year to make medicine for this flaming virus problem. It’s here that Covid-19 has the greatest chance to infect its host. The world will see a recession for sure. And India is already going under distress. May Impact Indian economy hitting investments as well as the manufacturing sector. Further hitting to Capital market, which is not a good sign for India.
The other two kinds of recession will not be a major cause to worry. Like – Strategy Recession or recession caused by wrong policy, and Economic Emergency Recession. Economic Recession differences tend to build up slowly and over long periods of time, before rapidly unwinding, disrupting financial intermediation and then the real economy. This recession depends on the long term slow down. But the factors limit the systemic risk of a potential shakeout in credit, though this risk can’t be dismissed entirely. It’s difficult to see Covid-19 contributing to financial imbalances, but stress could arise from cash flow strains, particularly in small and medium enterprises (SMEs). This is going globally, but happy to inform you can be corrected very fastly with Global interference.
Question: Dr. Ajay it means – it is going to give a setback to jobholders? I mean – it will increase further the unemployment in India?
Dr. Ajay replies with a smile, Not true. You can make this an opportunity. It will halt the job crisis if the Government sees it as an opportunity. I my view, it may halt the problem of unemployment blame on this Modi Government.
Question: Dr. Now, you named India, my question is how badly, India is going to be economically impacted?
Chairman Fox Petroleum Ajay said: Indian economy is very fast, and realistic. Hence, it can overcome realistic situations too, but in the case of CORONA, it is more rumor centric less realistic and very less dependent on host County China. Rather it is an opportunity for the Indian Market to attract business shares of China if this threat continues for a long period.
To understand this, we need to examine the transmission mechanism through which the health crisis infects the economy. If the taxonomy of recessions tells us where the virus likely attacks the economy, transmission channels tell us how the virus takes control of its host county i.e. China This is important since it implies different impacts and remedies. There are three plausible transmission channels to the economy:
A direct hit to Indian wealth market confidence (wealth effect): shocks to the real economy are via financial markets (and more broadly financial conditions) — they become part of the problem. But the Indian wealth market is not so high, as the real estate sector is now nowhere, due to Government has a bad eye on that sector, so it is not going to hit in that zone. Not going to Impact on India.
A direct hit to Indian consumer confidence: While Indian financial market performance and Indian consumer confidence correlate strongly, long-run data also shows that consumer confidence can drop even when markets are up. Covid-19 appears to be a potentially strong direct hit on confidence, keeping consumers at home, sleepy of flexible spending, and perhaps pessimistic about the longer term. This is a hit and will hit Indian sentiments, not good for the Government of India.
Supply-side shock to the Indian market: The above two channels are demand shocks and Indians can absorb, but there is additional transmission risk via supply disruption which Indians may not be able to sustain for the long run. It will target the manufacturing sector of India, which is already down. As the virus hit, Host county shuts down production and disables critical components of supply chains, gaps turn into problems, production could halt, lead to #unemployment and layoffs could occur, which major concern for Government of India and Prime Minister Modi, and healthy for the opposition. There will be huge variability across economies and industries, but taking the Indian economy as an example, we think it would take quite a lengthened crisis for this to feed through in a significant way. Relative to the demand impact, we see this as secondary.
Question: How, please suggest –How Coronavirus can create employment in India?
Dr. Ajay some up his interview with my last question and said see Recessions are predominantly cyclical, not structural, events. And yet the boundary can be blurred. He smiled and said according to me what is good for China may be Good for America, but what is Bad for china is always an opportunity to Prime Minister Modi. It depends on how he takes it. For me, If given an opportunity, it will take 13 days to Counter the Unemployment Problem once for all. It may seem to you a “joke” but Yes! I can do it. Thank You.
Many Thanks to Fox Petroleum chairman Dr. Ajay Kumar who shared his valuable time with us on this very important global phenomenon. If our govt. want to get benefit from this, they can generate new jobs for our people. I must say our govt. need to see this global phenomenon with different visions.
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