Pandemic and Its Impact on the Macroeconomics Variables- a Time to Look Towards a New Horizon

Pandemic and Its Impact on the Macroeconomics Variables- a Time to Look Towards a New Horizon

Since the start of the pandemic, various sectors have been affected, one of them that impacts most is microeconomics.

Prof. Geetika Jha
July, 29 2021
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It’s almost one and a half years since the world got firmly caught in the grip of a pandemic. People are not only worried about safeguarding themselves and their loved ones but also battling to keep their ends meet.

The more the spread of coronavirus, the greater the concern about our lives and livelihood. All sectors of the economy have felt the heat of the pandemic. There has been a total of 194,010,046 positive covid cases worldwide as of July 24, 2021 (WHO reports) and the world is still trying to find the answer as to what it would mean to get out of its clutches.

According to RBI, there is a sharp movement of inflation to the peak of 7.6 percent in October 2020, which is due to the pickup in the price momentum in food as well as in the core category.

The consumer price index (group/subgroup) was centred at 4.9 percent, higher than the levels seen in recent years. This has mainly happened due to the supply disruptions due to the imposition of national lockdown.

According to many economists, the covid-19 pandemic would lead to a prolonged slump in the developed economy. However, the government is busy saving their version by announcing their growth forecasts.

America’s congregational budget office claims that the American economy would grow by 3.7% and has doubled its forecast to 7.4%. The Bank of England also revised its estimate of GDP in Britain for the second quarter of the year by 1.5 percentage points.

In India, the inflation target for the monetary policy framework has been kept unchanged at 4 plus/minus 2 per cent for the coming five-year period till March 31, 2026, and this is done with the objective of maintaining price stability in the economy. However, many economies around the globe are considering tightening monetary policy due to rising inflation.

Now, with rising prices and unemployment, is the world heading towards another great depression?

This is a time to look in a different direction and rethink unemployment. Unemployment has been a widely used term since the 19th century, due to the shift from a land-based economy to a manufacturing and then to a major service-driven one.

The agricultural sector has been shrinking since then. So, in the advent of any kind of adversity, if someone loses the job, he has nothing to fall back upon because people living in towns and villages have grown apart.

According to Marx, this new kind of unemployment is a feature of capitalism. After the great depression, John Meynard Keynes opined that in the twentieth century high rates of unemployment would be a norm that would be detrimental to society. Full employment cannot be attained unless the government pitches in with innovative policies.

Since the onset of coronavirus in 2020, both financial and industrial sectors have had their hands burnt due to the ongoing crisis.

Uncertainties due to imposed nationwide/ worldwide lockdowns, reduced spending, disrupted supply chains, reduced investments in the business sector, the world is looking towards a shift in paradigm so as to look for the answer to the ongoing problem of the survival of individuals and the economy.

With the vaccination drive on sprawl, people are hoping things will normalize. Economies are now back on a hiring spree, with jobseekers wanting to go back to work. There is an ongoing dilemma in the businesses.

Workers fear being sacked, and employers fear them quitting. However, with the weightage of the former being stronger - all thanks to capitalists - should the economy continue to be in favour of the haves? So, what exactly should be the role of the government towards generating employment?

This is a time to have a new horizon and have a fresh idea about the idea of full employment which has long been abandoned by policymakers to favour the “natural” unemployment rate.

Genuine measures are expected of policymakers to balance the economy and make it better for the deprived section of society.

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