5 Long term positive economic effects of coronavirus

The negative effects of coronavirus are well known. But every cloud has a silver lining, including coronavirus. It is helping transform key areas of global economy in 5 ways.

July 24, 2020 10:00 IST | India Infoline News Service
The coronavirus pandemic is unlike any economic challenge that the world has faced in the past. All our textbook notions of how to spur economic growth in the face of a downturn have been rendered useless as lockdowns and the fear of getting infected have stopped or intermittently paused economic activity across the world.

While the jury is still out on how many quarters it will take before a U-shaped or a V-shaped recovery will be visible, what is widely accepted is that the pandemic will cause a paradigm shift in how we live and how we work. Moreover, governments and central banks across the world have been quite proactive doing what they can to support businesses and revive employment with unprecedented fiscal and monetary stimuli. As such one can expect that the economic effects of the pandemic will linger on for a long time even after it subsides. So, let’s take a look at some of the long term positive consequences of the coronavirus pandemic:
1) A more digital economy
Demonetisation was the shock that pushed India into the digital era as people adopted online payments in the absence or short supply of cash. Covid-19 is the shock that is forcing everyone to adopt digital in everything — from buying groceries to seeking online consultations with a doctor for minor conditions. 

India's total e-commerce shopper base, at 30% of its online population, is quite low when compared with 78% in China and over 70% in the US. In a 53-page report on 'India's Digital Economy in a Post-Covid-19 World', Morgan Stanley has projected that India's online shoppers will jump to 590 million from 190 million in 2020. The average spend per online shopper is also projected to nearly double
to $318.

2) Global supply chains will be redrawn
China has been the factory of the world for quite some time now and as a result it has become the pillar of global supply chains for everything from chips to drug APIs. The world has realised that it might not be a good idea to put all eggs in one basket. This would mean that countries like India that have long waited for their turn to make for the world would increasingly see more foreign businesses set up base and generate large scale employment.

3) Policy reforms gathering pace
The coronavirus pandemic has led India to initiate reforms that have been stuck in red tape for decades. For instance, the government has liberalised the coal sector and changed certain labour laws that were said to have been hindering businesses. Moreover, the government has also announced  agri market reforms such as bringing in legislation that will allow farmers to sell their produce to whoever they choose.

4) Liquidity rush in the capital markets
Central banks all around the world have cut interest rates and launched borrowing programmes to inject cash into the capital markets. The Reserve Bank of India came out with a plan in March to supply Rs 3.74 lakh crore of liquidity to the financial markets. While banks may have not been lending off the bat, their cash reserves — coupled with low interest rates — will mean that individuals and businesses will be afforded a huge breadth in borrowing once green shoots start to appear in the economy. 


5) Nature of jobs will be transformed
The coronavirus pandemic has led to a lot of companies rethinking office spaces and on-site work. Tech bigwigs such as Facebook, Google and Twitter have already made announcements regarding giving staff the option to work from home in the long term. It’s only a matter of time that many more companies follow suit as they determine that spending on office spaces can be cut and productivity can be measured better in terms of to-do timesheets. More workers are also finding out that the gig economy perhaps offers a lot more flexibility to earn money and follow passions.    


Every great global economic crisis in the past century has been followed by a period of boom. Real GDP growth in the 20th century and 21st century has been exponential despite the Great Depression of the 1930s, the recession after World War II, oil shocks of the 70s and most recently the Great Recession that followed the Lehman Brothers collapse. There is no reason why the global economy wouldn’t bounce back stronger this time around.

Economic crises often lead to creative destruction — a churning where inefficient systems and businesses are weeded out and new contenders emerge. Moreover, apart from all the first order economic impacts listed above, the coronavirus pandemic will also make our healthcare systems stronger and perhaps compel us to reconsider our relationship with the environment and nature. These potential changes could go a long way in helping the world take a leap towards equitable and sustainable development.







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