When pandemics spread, they carry on an economic contagion, beyond the morbidity and mortality of the disease itself. Economic activity has been curtailed to enforce social distancing — an important bullet within the coronavirus disease (Covid-19) war.

The World Bank and therefore the International fund (IMF) warned that the virus is pushing the planet economy into a recession worse than that after the 2008 financial crisis. Moody’s downgraded India’s GDP rate of growth forecast for 2020 from 5.5% to 2.5%. A United Nations Conference on Trade and Development (UNCTAD) report titled The Covid-19 Shock to Developing Countries pleaded “governments to try to to whatever it takes” to prevent economic contraction becoming a recession or worse, a protracted depression, and to guard the poorest.

United Nations secretary-general António Guterres involved a large-scale, coordinated, comprehensive and multilateral response supported solidarity and shared responsibility. His proposals for a “double-digit-percentage” of worldwide GDP investment, massively increasing resources to developing countries by augmenting IMF capacity including through Special Drawing Rights’ issuance and of MFIs just like the International Bank for Reconstruction and Development are critical.

The G20, representing world’s most powerful economies, expressed its resolve to defeat Covid-19, but thus far , concerted global action and cooperation, and enhanced liquidity and funding has not materialised. Significant national relief and stimulus packages announced by the us , Europe, China and India are expected to assist staunch the economic haemorrhage and finance the coronavirus war.

Developing countries, including India, face several economic challenges. These include volatility and precipitous fall in financial markets and commodity prices, and financing gap thanks to shrinking fiscal revenues and Covid-19 expenditure. Liquidity crunch, disruptions in international trade, and transport, depletion of exchange reserves, devaluation of their currencies, fall in export revenues thanks to export controls and contraction in global markets and economic engines also causes for concern.
They also face the prospects of a worldwide food, pharmaceuticals and medical supplies crisis as producing countries impose export control and stockpiling. India could face a remittances crisis thanks to coronavirus-related redundancies in major labour export markets.

The economic impact on India must be assessed by what some Harvard economists call the “shape of the shock” and it’s “structural legacy”. These will depend upon the character and extent of the disease burden, resources deployed/diverted for treatment/care/ vaccine, the trajectory of the pandemic, the fatal accident to sectors, state of the pre-crisis economy, policy responses and special measures taken.

Resilience and rebound will depend upon the duration of the lockdown, the stage at which the lockdown was imposed— in India’s case it had been early enough — and social distancing compliance by citizens. Reducing uncertainties around health security driven economic decision-making will help and slightly longer lockdowns seem better than stop-go options.

India has got to make sure that during this interregnum, a banking/credit crisis doesn’t occur, liquidity at household and company level is maintained, there’s minimal disruption in capital formation and investments. Labour displacement is to be minimised and migrant labour encouraged to remain in situ or return after the lockdown including though repurposing for the corona war.

Skill atrophy should be prevented, output and provide maintained through targeted support to strategic sectors, SMEs, SHGs. Providing social protection to poor and vulnerable farmers and workers is critical. Prime Minister Narendra Modi’s economic relief and stimulus package seek to realize these objectives and can still evolve.

If the lockout lasts for months, there’s risk of a protracted freeze within the real economy and recessionary prospect. we’ve to stay essential sectors firewalled through protective measures/PPE gear and affordable, rapid status tests and protocol until we open all sectors.

Walden Bello, the author of Deglobalization: Ideas for a replacement World Economy notes that Covid-19 dealt a second big blow to globalisation and connectivity. With China, its flag bearer,becoming the epicentre of the crisis and economic contagion, there’s rethink on the worldwide risks of over reliance on this “undisputed workshop of the world”, the most important trader and exporter. Countries everywhere are considering diversification strategies faraway from China and rooting for autarky in strategic areas.

Global investor reassessment about putting all their eggs within the China basket, presents an unmissable opportunity to draw in them to India. Although nobody should underestimate China’s enduring comparative advantage and resilience we should always leverage India’s large market, human resources and diversified production base to become a producing , services, research and development, and technology hub.

Pharmaceuticals, biotech, medical supplies and equipment and related infrastructure for health sector capacity, supply and value chain may be a vital multisectoral cluster to make with all stakeholders — private and public. durables , construction materials, electronics, engineering goods, IT, speciality textiles and garments, AI and robotics are other promising areas.

Article XX of GATT / WTO permits countries “to take any actions it considers necessary to guard it’s national security interests”. we will use trade restrictions, TRIPs, TRIMs exemptions to support domestic value and provide chains to guard our health, food and economic security.

A “new India” industrial and national trading policy is required to incentivise our entrepreneurs to be makers, not just traders. they need to build a Make in India hub to satisfy domestic and global Covid-19 related demand and subsequent rebound and revenge consumption. The adversity bought on by the virus can become a transformative economic opportunity to “Build Back Better”.

Lakshmi Puri may be a former assistant Secretary General , United Nations, former deputy executive of UN Women and former acting deputy Secretary General of UNCTAD. this is often the last during a three-part series by the author .

The views expressed are personal