Opinion Bracing for the virus
With coronavirus spreading across the world, forecasts for growth are being pared down. A global response is needed
Country needs to evolve well-rounded protocols for managing disasters, not look at them as only administrative problems. 
The centrality of China to the global economy means that the ripple effects of this crisis will be felt across the world.
The coronavirus has quickly morphed into a global public health crisis. While there continues to be uncertainty surrounding the extent of its spread, the fear and panic it has induced across the world is evident. So far, the policy response to alleviate its impact on economic activity has largely relied on conventional tools. On Tuesday, the US Federal Reserve cut interest rates by 50 basis points. Central banks of other countries such as Indonesia, Malaysia, Philippines, Thailand, and Australia have also cut rates, though of a lower magnitude. Others like Hong Kong, Singapore and South Korea have opted for aggressive fiscal stimuli. While such moves signal a willingness on the part of policymakers to take measures to prevent the slowdown in economic activity from deepening, these measures by themselves are unlikely to offset short-run supply-side disruptions and fear-induced lower household discretionary spending.
The centrality of China to the global economy means that the ripple effects of this crisis will be felt across the world. Forecasts of global growth are already being pared down. Stock markets across the world have reacted negatively over the past few weeks with trillions of dollars of wealth being eroded. Commodity markets are also feeling the pain. The disruptions to global supply chains, of which China is an integral part, are beginning to show up. The short-run costs to growth, especially in the Asian region, that is intensively interlinked to China, will be severe and this will have spillover effects on the global economy. While the full impact of the epidemic can only be gauged once it starts showing up in economic data, the longer it persists, the more extended and deeper the slowdown will be. Fear and panic, especially in countries where new cases are rising, are likely to restrict discretionary household spending. And as demand takes a hit, firms may respond by slashing wages and laying off workers. Further, as countries start to impose restrictions on travel, the tourism industry will also be hit.
For India, which is in the midst of a slowdown, the crisis could not have come at a worse time. While sectors such as pharmaceuticals, electronics such as mobiles, gems and jewelry and textiles, are expected to fare the worst, the government must undertake a comprehensive assessment of the fallout of the disruptions in supply. The top priority, however, should be to contain the virus. Monetary easing, fiscal stimulus, and other measures will only stimulate economic activity once that happens.
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