Amid the coronavirus crisis, the main priority for India should be to deal with the health crisis, said International Monetary Fund's Chief Economist Gita Gopinath. She added the priority after dealing with the health crisis should be to ensure that people and businesses affected by the pandemic get the help they need.
"Countries will have to continue spending on healthcare facilities to strengthen their healthcare infrastructure, especially developing countries," Gopinath said during the India Today e-Conclave Corona Series. She emphasised that the health crisis has to be dealt with in a calibrated way.
"Second priority has to be to make sure that the people, the livelihoods, the firms that are directly impacted by this crisis get the help they need. We strongly support the action being taken in India right now... I think what RBI is doing to ensure that credit flows to small and medium enterprises is important," she further added.
Talking about the impact of coronavirus on world economy, Gopinath estimated a loss of $9 trillion and bleak chances of recovery if the problem persists.
"We will have a deep contraction in 2020 and a partial recovery in 2021. But we are talking about a total output loss of $9 trillion between 2020 and 2021. The bigger concern is that if this pandemic spills over into the second half of this year and even 2021 then we're projecting a growth of (-) 6 per cent this year and close to 0 per cent next year... which means there's really not much of recovery," Gopinath said.
Likening the coronavirus crisis to the Great Depression, IMF's Chief Economist said that the shock is widespread where emerging, developing as well as advanced economies are in recession. She added that more than 100 countries have approached the IMF for financial assistance, which is being provided promptly.
Talking about the lessons from this crisis, Gopinath said, "You need to respond very quickly to make sure that financial markets are not deeply disrupted, that there is sufficient liquidity in the system. For instance, US Fed's policy responses compared to how they responded at the time of Global Financial Crisis, this is much faster."
"Another lesson one has to keep in mind for the future is that during these times when you are providing all this support and stimulus in the system, it's also important to keep track of the financial vulnerabilities that might be building up as you have crisis where you end with more non-performing loans," she added.
On globalisation post corona crisis, Gopinath said, "Even in the run-up to this crisis, we saw a trend of countries becoming more protectionist. And this health crisis has necessitated that international borders are closed in terms of travel for people. Because you cannot have workers going to factories, goods are not being produced, which means global supply chains are breaking down. Once we are past this, it very, very important that countries do not indulge in protectionist measures."
"So first, even now, it's important for countries to refrain from putting restrictions on exports of medical equipments. That really should be frowned upon. This has to be a moment of solidarity. This problem will not be solved unless the virus is contained everywhere in the world. We know global supply chains are essential for productivity. If we have protectionist measures being undertaken and the global supply chains are more permanently broken down, then we are going to make it that much harder o get recovery that we are projecting now for 2021. I believe there are risks of de-globalisation but I feel there is enough political support to ensure that doesn't happen," she said.