When economists around the world are diving into the alphabetical soup and speculating trajectory of global economy, one thing is clear that it is going to impact the world very hard. Some economists are predicting V-shaped recovery, and some are saying that it would be W-shaped recovery but are warning that this is going to be worse than any other recession and crisis in the past.
However, when every other economist is busy predicting the recovery of the global economy, Goldman Sachs has predicted 1.6 per cent of growth rate for Indian economy. Arun Kumar, a renowned economist said, “India is already in a recession and if the output is 25-30 per cent of the total output then you are not going to recover that very quickly. I think this time no stimulus will work. Monetary policy will not work because it is not the usual business cycle where the demand has decreased because the production has stopped and income is not being generated. And when that happens we are in depression, we are not in recession and in a depression you may have -10, -20 per cent rate of growth for investment will just cease and recovery could take several years. So speculation of the alphabetical recovery trajectory is not meaningful.” Kumar also added that any alphabetical recovery is unlikely.
Even though no one is sure about the alphabetical recovery of the economy one thing is for sure that it will be far severe than global financial crisis of 2008.
The global financial crisis refers to the period of stress in financial market between 2007 and 2009. Basically it emanated from the slump in the US housing market that played a key role in this crisis and spread to the rest of the world through various linkages in the financial system. But this situation is little different as it is not trickling down to other countries. In fact, every country’s economy is collapsing and there is no one who can act as a big brother.
As many analysts and economists have already warned that it is going to be much more severe and prolonged than 2008. According to a report by UN’s labour study about 400 million workers in informal sectors in India may sink into poverty and this can very easily wipe out 195 million full time jobs or 6.7 per cent of working hours in the second quarter of the year. But all depends on how fast this pandemic is contained and how actively the government intervenes.