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Is the global economy headed for recession?

Global Recession

Approx Read Time: 4 minutes
Global Recession

In News:

  • The global death toll due to COVID-19 has crossed the 14,510 mark, with over 3.32 lakh people infected.
  • A diverse set of industries has been impacted by the spread of the virus.
  • There are fears that the global economy might come to a standstill.

Impact of Coronavirus on Global Economy:

  • With lesser engagement in the world, a lot less economic activity would occur.
  • Businesses face the prospect of disrupted supply of components to make products, or of having to shut some of their factories temporarily, not to mention large swathes of the workforce having to be quarantined.
  • According to analysts, the global economy may tip into a recession unless the virus turns out to be seasonal.
  • Recession: A recession sets in when the economy shows two consecutive quarters of contraction.

The most impacted Sectors of India:

  • Indian pharmaceutical and pesticide sectors, and automobile and mobile phone industries depends on China for supplies of components for products that these sectors make.
  • The Indian pharma industry depends on China for 70% of raw materials, while input costs has gone up by 50% as of February this year.
  • The Indian gems and jewellery sector depends on the Chinese and Hong Kong markets for 70% of its exports. The partial closure of the Chinese and Hong Kong markets is likely to result in a loss of about $1-billion by April 2020.
  • Even the software services industry will see limited progress, with the West, a key market for software services, being hit badly by the virus.
  • Travel sector has been hit severely as countries issue advisories to eliminate unnecessary travel and go into lockdown mode.

Sectors that could benefit:

  • To avoid going crowded area, e-commerce sites may see even more traction.
  • With schools shutting down temporarily, online learning platforms are likely to get a boost.

Also Read: Govt. asks UGC about the eligibility of 2 private institutes for IoE status

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