COVIDCRISIS and the World: What Lies Ahead?
Centre for Asia Pacific Business Research, Economics and Innovation (CAPBREI)
Saturday, 25 April, 2020
Report By Aiswarya Martin (IBM 2017) and Aayush Poddar (IBM 2017)
The first webinar of the pandemic lecture series, “COVIDCRISIS and the World: What Lies Ahead?” was conducted by CAPBREI on Saturday, 25 April. The recent COVID 19 crisis is unlike anything the humankind has seen in the last hundred years. One third of the world is under lockdown, stay-at-home and social distancing are the new normal, oil prices have plunged into negative territory, economies are bracing for a recession that might be worse than the great depression, millions are jobless or looking at possible unemployment. Once this crisis is over, the global economic and business landscape is likely to go through a permanent and drastic change. In the webinar, four eminent speakers discussed this unprecedented crisis through four different lenses: entrepreneurship, healthcare, labor market, growth and development. The centre’s director Dr. Anirban Ganguly moderated the event. The speakers at the webinar were –
Prof. Ronita Choudhury talked about the impact of COVID 19 on work and workspace. She started with mentioning that “work from home has now become the new normal” and pointed out that a lot of firms are very comfortable with this new system and some companies are even thinking to limit their physical office spaces. The boon of working from home can only be capitalized if the employee and employer stick to these main things – setting up a good system of monitoring performance, building trust with teammates, having laid out clear goals, professionalism, and strong communication. The mere absence of a social aspect to work is the major reason why companies should shift to a purely output-driven method. As an expert in the field of entrepreneurship and innovations, she said that the entrepreneurship set up in India is very different from that of Silicon Valley. She quoted Alex Lazarow and his metaphor of unicorns and camels. A camel being a survivor must be the symbol that every entrepreneur should have in mind. She stressed on the fact that the Indian entrepreneurs should be able to create a business that can survive harsh economic conditions such as COVID 19, supply chain issues, talent pipeline challenges, etc The dearth of talent pool according to her can be mitigated by bridging the gap between skills required and formal education. Prof. Choudhury talked about how companies can provide education opportunities and then gain from the desired results. The budding businesses in India have their central focus on bringing something new for the mass market. They are also trying to bring maximum supply chain efficiency which can be the profit centre in the future. Prof. Choudhury ended her session by talking about the program RISE in Jindal and its training programme for students to be entrepreneurs. RISE trains students to adapt changes into their age-old family businesses and become resilient to hardships.
The next speaker, Dr. Nilanjan Banik started by sharing the statistics of income household data of India. The median annual income of the Indian population is Rs. 3,00,000 and the per capita income is close to Rs. 1,60,000. 80% of the population earns less than Rs. 1,60,000 annually and only 1% of the total population earns more than Rs. 15,00,000. He went on to share the data of expenditure on health infrastructure and their death tolls in the time of COVID 19 by different countries. The US spends 17% on health care and India only spends 3.89%. The decreased number can be a result of the young immune population in our country but more statistics are required on that. The 80% mentioned earlier constitutes mostly of labourers and migrant workers. Unlike diseases like TB, Cholera, etc which affect mostly the lower-income group population, COVID 19 has affected all income groups. This is mainly because of the unavailability of a vaccine. If vaccines were available however, then it would have again a question of who has money to afford it and who do not. According to him, people who were doing backend or office work are not that affected compared to the migrant workers. Another noticeable thing in this pandemic time is the shifting of job patterns, often a downgrade and a resulting dropping of value addition in the economy. In the 2008 crisis, the value addition was dropped by 12% and in this current scenario, within a couple of months the value addition has been contracted by 20%. Even the IMF has lowered the prediction for India’s GDP growth rate from 4.5% to 1.9%. Dr. Banik concluded that the people who are mostly going to be impacted are small business owners and daily wage workers. Governments should support these 80% population so that they have something to rely on in this hard time.
The next speaker, Dr. Prasun Bhattacharjee discussed the issue of health care aspect of the crisis. He said that not only India, but all the pandemic hit countries need to strategize on their priorities. They need to focus on basic 3 factors. The first is resource allocation in the health sector. As resources are limited, healthcare sector needs to borrow resources from the other sectors. Dr. Bhattacharjee talked about two types of costs, medical and economic, borne by different countries as a result of the crisis. The short term demand side costs will be associated with reduced access to business opportunities while the long term demand side costs will be caused by the high mortality rate in a country. Moreover, unemployment will also rise which will result in loss on long-term demand. The short term supply side costs are coming from unprecedented measures like social distancing and lockdown while the long term supply side cost relates to the declined productive capacity of a country, reduced workforce and productivity. Therefore, investing in essential health care in a country like India has become extremely important, as he reckons that the lockdown cannot continue for a very long time. We should strive to tackle the issue efficiently and as swiftly as possible. The second factor is reconstructing the health sector. Dr. Bhattacharjee talked about the “Rip Van Winkle” effect, waking up and realizing the importance of a balancing act between expenses and efficiency. Countries need to strengthen their diseases surveillance mechanism to a greater extent. The medical institutes need to adopt multi-disciplinary approach to revamp the way interns are trained and should prepare them for a pandemic like this. The government could sponsor universal health insurance program. And the third factor would be the mortality number. People might have health related problems other than COVID 19 but might not get treated because of the focus towards the crisis, giving rise to higher mortality rate. Dr Bhattacharjee concluded with expressing concern about the plight of the labourers, who are facing extreme poverty and hunger during the lockdown. As a result, not only hunger-related deaths are likely to be higher but also more cases of suicides will increase the mortality rate.
The last speaker, Dr. Arindam Mandal discussed the impact of the crisis on the labor market with a global perspective. He talked about the aggregate supply shock, as after the crisis hiring process for the corporates would be a costly affair and unemployment rate would rise. He called this pandemic “demonetization on steroids” and more dangerous than the 2008 crisis. This crisis will bring in a change in the consumer preference and companies will re-evaluate their country risks to reduce reliance on a single country for the operations. Dr. Mandal deliberated on the extent of the crisis that is still unfolding. Unemployment rate in US has jumped to 20% and world trade declined 32%. The recovery from the recession would probably be U or W shaped. In the short term, unemployment rate in developed countries like US might go as high as 32%. Negative aggregate supply shock can turn into negative demand shock which will be difficult to cope up with. Short term job separations may make recovery difficult due to labor market frictions. In the long term, certain jobs may become obsolete as investment in automation will increase. There will be more demand for gig economy. There will also be increase in the inequality that can undermine the democratic values and give rise to authoritarianism. Dr. Mandal explained that as a result of the crisis, locally, specific industries like airlines, retail sales, tourism, hospitality will be affected adversely, attractiveness of living and working in big cities like New York and Mumbai will decline. Globally, countries are likely to promote their remote work culture and this will have an impact on outsourcing. One of the major impacts would be a decline in the domestic and international migration which will disrupt the international supply chain. Also, after the crisis, there will be a likely increase in certain services like home delivery. Dr. Mandal recommended that governments across the world should adopt policies for short-term and long-term individually. In short-term, governments would be willing to stabilize aggregate demand and provide steady income and guaranteed work. It should also help and support small scale business by providing low cost credit lines and facilities to the businesses. Also, there needs to be a balance the risk of infection with gradual opening of the economy. In the long term, more cross-national institutions should be created to tackle a pandemic-like global crisis now as well as in future. Dr. Mandal also rooted for universal basic income to absorb shock and be future ready.