COVID – 19 has not only affected the asset prices and stock market but real lives and day to day activity. Stock markets have crashed earlier too but this time the situation is very different as there is no manipulation or speculations but a global pandemic.
We can be in a position of recession in coming years. There is no production of goods, there is a forced stop for all production activity, not only within the country but supply of goods from outside the country too.
Everything is so interdependent in the economy. Like if a restaurant is ordered to shut down there will be no demand of green grocer items, unutilized manpower. The owner has to pay their fixed expenses (rent, power, salary etc) but no income in the hands of green grocer and manforce.There is no revenue but expenditure.
A consumer now is spending on essential commodities and there will be a huge fall in the demand of non-essential commodities in the market(affecting its production and revenue generation to economy).
Due to this drop of demand and supply in the economy there is less movement of money in the economy. This lack of economic activity and thereby less money in the economy is going to hit everyone.This story plays across the sectors, across the economy and across the world.The coming days are crucial in terms of dealing with this pandemic and its economic impact.
Both the Monetary and Fiscal policy support will be required to face the tough situation.
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