Covid-19 Outbreak

This Covid-19 pandemic has forced us to think about our relationship with Nature. The old idea that we can control Nature and exploit it to our advantage will no longer work. In our pursuit of wealth, we have caused large scale damage to the environment, be it through mass deforestation or burning of fossil fuels. The time has come to reimagine our existence on this planet earth and try to adopt sustainable methods of living.

The increase in the human population can also be interpreted as if we have infected the Earth with manifold increase in our population over the last century. The large scale mining of mineral resources has damaged the flora and fauna of the Earth. Our Earth is losing species at an extremely fast pace and its life producing ability has taken a hit due to our activities. 

One positive thing out of this ongoing lockdown across the world is that the Nature has regenerated to some extent and animals can be seen roaming freely in open places. The level of pollution in our cities has come down and our rivers such as Ganga has neven been so clean in the last 40 years. We have to learn the lessons during this Pandemic and apply them to avoid such mistakes.

Covid-19-Flattening the curve

The pandemic due to the outbreak of Covi-19 has emerged as a major health emergency across the globe. Till date, around 1.2 million people, have been infected by this virus and more than 60,000 people have lost their lives. It is difficult to estimate the mortality rate on account of this illness as a large number of cases are asymptomatic and hence these cases often don't get reported but the mortality figure due to Covid-19 that is being projected in media is around 3-4%. It is widely believed that the mortality rate varies with the age group and the people over 60 years old are the most vulnerable group. Countries such as Italy have seen a higher mortality rate on account of a sheer spike in new cases that can overwhelm the healthcare system, leading to a large number of infected people unable to get proper treatment. The disease has crippled the travelling and tourism industry as people have been asked to stay at home as several countries have resorted to lockdown to prevent the disease from spreading.

It is a highly infectious disease and one person on an average infects more than 2 people per day under normal circumstances. Scientists have advised people to adopt "social distancing" as the only way to break the transmission chain of this disease. In this way, the virus can be contained within few groups and finally eliminated. We all have to come together in this fight against Coronavirus, which has emerged as a major challenge to humanity since World WAR II.

The performance of the NDA II -(2014-till date)

The NDA II assumed power on 26th May 2014 and they came with huge expectations as the Indian economy was counted among fragile 5 towards the end of 2013. The GDP growth had come down towards the end of the term of UPA II. The rising discontent against the UPA II had brought NDA II under, Prime Minister Narendra Modi, to power.

The new government was expected to accelerate the reform process but instead, it followed the incremental approach of reforms. The GDP growth remained at the rock bottom level and the government changed the calculation methodology in order to show a better economic performance. However, the lack of jobs and the closure of SMEs meant that this government has not been able to deliver on its economic agenda. The ill-conceived, Demonetization, backfired and led to falling credit for small enterprises. The GST system which was implemented in July 2017, was far from satisfactory and it choked the engine of India's economic growth. 

The government seems to be more focussed on its social agenda of Ram Temple, Triple Talaq, Article 370 and the Citizenship Amendment Act. The government needs to learn from its failures and it should stop trying to divert attention from pressing economic issues. 

The future of the telecom Industry in India

The Indian telecom sector has gone through a period of turbulence over the last 4 years. The number of players in the sector has come down due to consolidation in the sector. Many companies declared bankruptcies as they could not compete against the aggressive low tariffs brought by Reliance Jio. Currently, there are just 3 private players and two PSU players(BSNL, MTNL). India has achieved around 90% teledensity but the mobile teledensity in rural India is just 60%. It is estimated that there are around 300 mn people in India who don't have a mobile subscription.

4G Mobile Internet has already made a huge impact on Indians as they use around 11GB of data per month and this has enabled the digital economy as people use different mobile applications for basic financial transactions. High-speed broadband Internet will lead to the entire world coming together to form a small village.

India is expected to have 3 private and one public player going ahead. It is expected that Vodafone Idea will be able to survive this AGR issue on account of timely aid from the government. The government has announced the merger of BSNL and MTNL and it should lead to the creation of a strong PSU player in the sector.

The way forward looks interesting as the sector will become the main driver of economic growth especially with the introduction of 5G internet, which will lead to the introduction of IoT, Autonomous driving and Connected cars.

Coronavirus Outbreak -Impact on economy

The world is currently facing a severe viral epidemic due to coronavirus outbreak in Asia that has spread to other parts of the world. It has severely impacted the Travel and Tourism industry as people across the globe have been advised to cut down on unnecessary travel. The crude oil price has collapsed and OPEC is mulling cutting oil output to bring supply in equilibrium with demand. Factories in China had to close for an extended period to cope with this unprecedented situation. It led to decline in demand for commodities especially in China on account of the extended shutdown of manufacturing units in China. 

China is considered the manufacturing engine of the globe and so any loss of production in China can impact the supply of key products across the globe. As of now, the focus of the world is to contain the spread of this virus with minimal loss of life. Its time for the world to diversify its supply lines and not rely on a single country and this is a key lesson from this epidemic. The economic recovery is expected to be swift once the situation normalizes and we hope that mankind is better prepared to deal with such epidemics in future

Technology as enabler of economic growth

The rise of science and technology has been the key driving force behind the growing economic prosperity in the modern world. The use of technology makes it easier to produce goods at a lower cost and thus provide a rate of return more than the cost of capital for entrepreneurs and thus generate value creation. The development of new technologies and the creation of new applications from existing technologies helps to fulfill unmet needs of the society and the society becomes more productive in the process, creating a virtuous cycle of economic growth.

The discovery of electricity and its different applications was perhaps the first major technological tool that ushered massive economic development on a global scale. It made society more productive and led to other inventions in due course of time that supported economic growth for decades.

In recent times, the invention of the Internet has transformed the world into a small global village. People find it easy to communicate with each other and this has made booking a cab, ordering lunch or transferring money extremely easy. The global growth over the last 20 years has been driven by the rising use of the Internet. Nowadays, it is difficult to imagine a workplace with no internet connection.

Nowadays, the work is going at a fast pace to commercialize the applications of Quantum Computing, Artificial Learning, and Blockchain and they have potential to generate a next wave of economic growth.

Free market economy promotes higher return on capital

Wealth creation occurs at fast speed in a free market economy where the intervention by the government is to the bare minimum extent. Capitalist economies support free-market system as entrepreneurs take major decisions based on expected return on capital. This is the reason that the capitalist economies of the world are generally better off compared to countries that try to follow the socialistic model. Capitalistic countries encourage entrepreneurs through lower tax rates and easy regulatory compliance processes. They reward innovation and enterprise through appropriate patents and wealth accumulation. 

On the other hand, socialistic countries put a lot of emphasis on redistribution of wealth through high tax rates and discouraging wealth accumulation. This often creates scarcity of goods and services as socialistic economies operate at less than potential due to deadweight loss on account of higher tax rates. Large scale central planning by governments often results in poor allocation of capital and that leads to low return on capital and ultimately perpetuates poverty.