Nassim Nicholes Taleb, a former options market broker was first to suggest the term ‘Black swan’ which is used to emphasize unpredictable rare events that have the potential to deeply affect the financial world and global economic system. With the impact of trade were brexit and various geopolitical issues. The global economy has been going through a hard time and the possibilities of recession and economic slowdown are global challenges. One of the concerns is the fear of the ‘Black Swan’ notion coming true , further deteriorating the global economy which has already been fragile playfield for some time. Impact of outbreaks like corona virus can be interpreted through the impact on exchanges. Financial markets strongly react on the flow of information about these kind of unexpected events, an increase in death toll might suddenly result in 10% loss in value of stock markets. On the other hand, even a shred of good news could be regarded as an opportunity to buy because we are talking about China which is considered the “factory of world”. It would be wise to assess the impact through the supply chain, foreign trade and real sector channel . The impact of this virus can be felt easily because it has impacted millions of people throughout the world.
IMPACT OF CORONAVIRUS ON THE DEMAND – The virus has slowed down the domestic demand , this has a more prominent impact on the economic growth. Within the economic sphere the epidemics and natural disasters impact the service industry the most. Disturbance caused by “Wuhan virus” has affected key sectors like global tourism, trade, manufacturing, automobile and smartphone manufacturing firms in mainland China. As a result countries have a high dependency on China for goods especially small components and parts have suffered . Market experts fear that the world’s reliance over China will continue to hurt global growth until the virus is contained. Slowing down of China means less product exports which would affect the main products exporter such as Brazil and Australia, mostly dependent on China in its intermediate goods. South korea’s economic growth in the first quarter of the year might end up 0.4% lesser due to this virus. Decrease in global growth expectations also brings down the petroleum prices, the petroleum prices dropping below $55 is a positive development in terms of inflation and account.
IMPACT OF VIRUS ON INDIAN ECONOMY : The Indian Economy is recovering from the downfall caused by the Novel Coronavirus. However ,there are some irreparable damages already done accounting for 1.5 lakh crore on the country’s GVA(GROSS VALUE ADDED) and employment loss of {60 lakhs} jobs during FY 2021-22 said a report by KPMG. The economy is expected to contract in range of 1.1% to 13.6% depending on the ‘U’, ‘V’ or ‘L’ shaped. In the recovery in the coming month, the report adds, COVID’19 as a special event that might have induced some structural changes in the economy. It is also underlined that the impact on the output, employment and growth trajectory of India would depend on three major factors.
1. The extent of morbidity
2. Duration of external and internal restrictions
3. Actual size and efficacy of physical and monetary policies introduced by the government are believed to major determining factor.
(Writer is a B.Com final year Student at Faculty of Commerce, BHU and Member of Finance and Economics Think Council.)