Prof. R K Shivpuri
Ever since 1917 no single event has disrupted the world economy as much as Covid 19. The outbreak of Covid 19 was announced by China on and it reportedly originated from Wuhan, an industrial town in China where live birds are sold. Covid 19 belongs to a family of Corona virus which has the effect of brutal assault on the human system. According to ACUITE research, India will lose US$4.6 billion per day during these 54 days of lockdown announced by Govt. of India. Indian economy was already growing at 6 year low rate of 4.7%. The present lockdown has created unprecedented problem for Indian Industries and we are looking at a much lower rate of growth of <1 % as suggested by Moody. The total economic loss due to COVID-19 is expected to exceed $4 trillion, almost 5% of the global GDP as per Asian Development Bank, and these seem only conservative estimates. It is difficult to quantify the contribution of Covid 19 to economic slowdown. We have yet to arrive at the truth regarding the reach, the scale and the amount of disruption caused to human life by Covid 19.This will be determined when the present disruption will stop. Let us understand the various factors contributing to economic slowdown caused due to Covid 19.
Demand & Supply – Due to the nationwide lockdown, there is a disruption of demand & supply chain across the country. The worst affected sectors are Hotels, Hospitality, Tourism & Aviation. Among these, the most vulnerable sections are the unorganized sector like labourers and daily wage workers in hotels, hospitality, loaders in the airports, and aviation & rail transport industry. This will cause a tremendous increase in unemployment leading to further weakening of economy. The retail sector has been affected by closing of malls, cinema halls & the shops. This is also raising the risk of the job losses of the employees. According to the estimate by Asian Development Bank (ADB), the total economic loss due to Covid 19 is expected to exceed US$4 trillion. However the exact amount of loss can be calculated only when Covid 19 starts reducing.
In order to mitigate the effects of Covid 19, United Nations Council on Trade and Development (UNCTAD), April 2020, has proposed a number of measures to ensure the facilitation of international trade and the transport of goods. It is crucial to keep ships moving, ports open and cross-border and transit trade flowing,
The world has already started finding ways to run the economy in virtual environments and operate factories while complying with the social distancing.
The latest trade figures given by the Deptt of Commerce, Govt. of India show that exports in April-March 2019-20 are estimated to be USD 528.45 billion, exhibiting a negative growth of (-) 1.36 per cent over the same period last year. Overall imports in April-March 2019-20 are estimated to be USD 598.61 billion, exhibiting a negative growth of (-) 6.33 per cent over the same period last year.
The situation will worsen as time progresses, since the full effects of Covid 19 will come into play.
China is the original victim of Covid19 and their industries have been shut for the last 4-5 months. India is one of the major importer of Chemicals, Pharma products and Dyes as shown in the following table (source:https://commerce.gov.in). All of the above is in the form of raw material which is used to manufacture chemicals, pharmaceuticals etc. whose export has suffered severely due to stoppage of raw material from China.
In world trade, China accounts for 13% of world exports and 11% of world imports. It is only natural that China will impact the Indian industry. The dependence of India on China is massive so far as imports are concerned. The China accounts for a significant share in most of our imports. As shown in above table, almost two-fifths of organic chemicals and 1/8th of Inorganic chemicals that India purchases from the world come from China. Medicinal and Pharmaceutical products constitute about 36% of India’s imports.
India imports 45% of its total electronic needs from China. Apart from these, India imports Fertilizers, automotive parts, machinery which account for over 25% from China. Also, about 90% of some mobile phones are imported from China.
Since India imports raw material from China, due to the closure of Chinese factories, our imports as well as exports took a heavy beating. This has resulted in a significant ramification on the Indian industry and hence a huge economic loss to India.
The Stock Market in India has been experiencing extreme volatility in the last couple of months. Actually the fall in Stock Market is in tune with the markets across the world. The BSE Sensex which was 42273 points on 20th January 2020 is about 31000 points on 27th April 2020.
All large, mid & small caps have gone through sharp falls. Abhishek Ram in Outlook Money has referred to Covid 19 as a Black Swan event, which describes a highly unexpected event that also has an extreme impact. The effect of Covid 19 on Stock Market has all the characteristic of black swan.
Currently, Stock Market has crashed around 30% in 3 months. It is not possible to guess when the economy will be back on track, which will depend upon several factors like trade, demand & supply and also when we will get rid of Covid 19.
Just two days back, Franklin Templeton India decided to wind up 6 Mutual funds. In an interview to CNBC TV on 27 April, Sanjay Sapre, President, Franklin Templeton confessed that he saw significantly reduced activity in Bond market in March-April and unprecedented illiquidity for securities rated below “AAA”. He further found unprecedented redemption in schemes post Covid 19. Here is the first straight victim of Covid 19.
Considerable work is going on in several countries to find a drug or a vaccine in a year or so to neutralize its health hazards. Only one thing is certain: life after Covid 19 in 2020 will not be the same as before in 2019.
Impact of Covid 19 on Education
In order to avoid any risk to the lives of students, most countries have closed Schools, Colleges and Universities. Teaching has moved online on an untried, uncommon and unprecedented scale. The impact of this new form of teaching and learning will be in areas of social, emotional and most importantly academic life of a student.
First, let us discuss about School Education. Loss of real Schooling will cause upheaval in children’s social life and learning. What children learn at School by interaction with class mates cannot be replicated online. Assessments of students can have large errors and will never reflect a child’s ability and potential. This will have longterm consequences on the personality development of a child. Also, access to different kits available to students will lead to differences in productivities of children and hence to inequality.
Schools are important to childrens’ growth as they allow them to increase their confidence, socialization, teamwork and inspiration. School teaches students skills they need to succeed on the job and in other areas of life. School also help students achieve a well-rounded knowledge base, which leads to a more enriching life. Even a short period of missed School will have repercussions for student’s skill growth. Denial of three months of Schooling presently in India will lead to nontrivial deficiency in their skills. We can’t have a definite value of skill loss but only a rough estimate. The United Nations has warned of the unparalleled scale and speed of the educational disruption being caused by Corona Virus. Currently, school closures in over a dozen countries due to the COVID-19 outbreak have disrupted the education of at least 290.5 million students worldwide, according to the United Nations Educational, Scientific and Cultural Organization.
Impact on School education
Carlsson et al. (Carlsson, M, G B Dahl, B Öckert and D Rooth (2015), “The Effect of Schooling on Cognitive Skills”, Review of Economics and Statistics 97(3): 533–547) discuss a situation in which young men in Sweden have variation in number of days to prepare for tests. The authors show that even just ten days of extra schooling significantly raises scores on tests of the use of knowledge (‘crystallized intelligence’) by 1% of a standard deviation. Burgess and Sievertsen (April 20120) have argued if we were to simply extrapolate those numbers, twelve weeks less schooling (i.e. 60 school days) implies a loss of 6% of a standard deviation, which is non-trivial. They do not find a significant impact on problem-solving skills (an example of ‘fluid intelligence’).
Some students will get help from home but that will not be the story for majority of the students. All the students’ families will not be literate and exposed to current levels of knowledge and will have non-cognitive skills. It is hard to help the children with something that the parents do not know. This will also lead to inequalities between the levels of student’s understanding. This will lead to inequalities in the growth of the children.
March-April are the key assessments period for students. Internal assessments provide information to the parents and student about the performance and progress of the student. This information is a lodestar and provides information to the student’s direction and corrective steps to be taken, if necessary. The loss of this information can delay the understanding of the difficulties of the student which can have longterm consequences. Any wrinkle in understanding left untouched during school days will have effects later in life.
By the time, the lockdown was announced in India, most of the papers of class XII exam was over. CBSE has already announced the dates for the remaining papers.
In educational institutions, the online assessment tools are replacing traditional exams. This is a new area for both teachers and students, and assessments will likely have larger errors than usual.
In an interesting talk Marmolejo (Webinar on Covid 19 and Higher Education) has discussed that in 2008-16, globally the tertiary education enrollment increased 52%, in India the growth was 109%. A comparison of level of education between China & India is shown in Fig 1 (1970-2050 projected). It is seen that after 2020 the Chinese education level is showing a decrease up to 2050 and the Indian tertiary education is showing a significant increase from 2020-2050 of about 200 million people in the age group of 25-34. The large no. of students in the tertiary education system presents massive challenges for Indian education institutions.
Numbers accessing different levels of education, 1970 – 2050 (projected)
The lockdown has resulted in all colleges & universities temporarily closed, students returned to home & efforts towards remote teaching started. Suddenly, research has been disrupted because there is neither laboratory at home nor is an availability of latest books presents in the library to be at home.
In May-June 2020, there will be pressure on the internet for admission of present and new students plus online courses. This will be the dawn of a new era in students learning processes. It must be remarked that a teacher communicates not only by speaking but also by gestures of eyes, hands, and body language. These additional channels of communication play a non-trivial role in communicating with the students. We will have to think of new ways to overcome this lacunae in online teaching.
Since all teaching and learning will go online, there is bound to be learning deficit among the students. How do we ensure that this is kept to a minimum. It is extremely important that the students remain interested and motivated throughout the course of study. We have to ensure that and also maintain integrity of testing and learning assessment.