Coronavirus in India: How the pandemic crisis can affect the world economy

1.4 billion people live in India, one sixth of the world’s population. Here are some of the ways it will affect the world economy as well.

India is the fifth largest economy in the world and contributes significantly to global growth. It has relatively high growth rates (between 4% and 8%) and a large territorial extension.

Even in early 2020, before the pandemic hit, the IMF had cited the indifference of production in India as the main reason for the low figures of global growth in 2018 and 2019.

The IMF lowered its 2020 forecast to 5.8% in part because it expected more of the same on the subcontinent. It now appears that global growth for 2020 is down around 4%, while India is down 10%.

Everyone has been expecting a big rebound in 2021 from India and the world, but now it seems seriously unlikely.

For example, Sonal Varma, chief economist at the Nomura investment group in India, predicts that India’s GDP will contract by 1.5% in this quarter of the year.

Considering the significant difficulties with the pandemic also in Brazil and South Africa, we can expect the impact on global growth to be considerable.

In terms of collateral effects, the scale of the crisis in India is likely to delay international restrictions more than anticipated.

In the words of Soumya Swaminathan, chief scientist of the World Health Organization (WHO): “The virus does not respect borders, nationalities, age, sex or religion.” As some have rhetorically asked, can a country of this size isolate itself?

On a recent trip from New Delhi to Hong Kong, for example, 52 passengers tested positive for coronavirus. The Indian variant has already been detected in other parts of the world. In India, the second wave of the virus has also been caused by the British variant.

Preventing this spread from India requires strict quarantines and travel restrictions. This is bad news for airlines, airports, and businesses. That would also have a damaging effect on global growth.

The pharmaceutical industry in India It is the third largest in the world in terms of volume and the 11th largest in terms of value. It contributes to 3.5% of the total of medicines exported globally and around 20% of the exports of generic medicines.

If these exports are compromised, there will be all kinds of consequences for healthcare around the world.

In the current situation, India produce around the 70% of vaccines in the world.

The Serum Institute of India (SII) received the rights to produce the AstraZeneca vaccine for 64 low-income countries in WHO’s Covax program, as well as 5 million doses destined for the UK, for example.

The crisis in India has already meant that these vaccine exports have been postponed or canceled, leaving many countries vulnerable to new waves of the virus and likely delaying their efforts to return to normalcy.

If India is unable to provide vaccine supplies to the rest of the world, we can expect side effects in the form of recurring lockdowns, an increased need for social distancing measures, and a significant slowdown in economic activity.

India provides administrative staff for many activities in Western Europe and the US, especially in the financial and healthcare sectors.

With these services now in jeopardy, the US Chamber of Commerce, for example, is concerned that the Indian economy may create “a drag on the global economy“.

In the UK, another example, trade ties with India are especially important after Brexit. This is demonstrated by the two attempts to visit Prime Minister Boris Johnson in 2021, both canceled at the last minute due to the pandemic.

Given all these problems and the unfolding humanitarian crisis, it has become imperative for the world act quickly to help India.

Although with short delays, this help is arriving. The UK sent oxygen concentrators and ventilators. The US sent raw materials for vaccines, drugs, rapid tests and ventilators. And Germany transferred medical aid and oxygen.

All that is provided is probably A drop in the ocean of India’s requirements, but at least it shows an appreciation that we are in this together.

The Indian government may have been ineffective in the current crisis, but not recognizing how it will affect the world would amount to an equivalent level of complacency.

If the major powers don’t do their best to help, the crisis of India will become a crisis worldwide in a short time, not only for health but also for the economy.

* Uma S Kambhampati is Professor of Economics at the University of Reading in the UK.

This article was published in English on The Conversation. click here to read the original.

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