The entire world has been grappling with the coronavirus pandemic. The world economic growth has plummeted. The sluggishly growing ‘developed’ economies have been crippled. The ‘high growth’ emerging economies are expected to slip in the negative. The unemployment rates have skyrocketed. The industries and businesses have been disrupted at an unprecedented level turning most business models topsy-turvy.

The world hasn’t seen a public health hazard of this enormous scale and spread in over a century. The world will remember 2020 as the new historical divide – Pre COVID & Post COVID – with all economies, sectors, lifestyles majorly impacted.

Pre COVID & Post COVID Divide:

Against this backdrop, the title of our article sounds bizarre. But readers, problem means opportunity! Let’s look down at some historical data of major disruptions the world has faced since World War II. The major crisis in the past since – Asian Crisis, Financial Crisis etc.

World GDP Growth – Quarterly

*Source – Fed, Bank of St Louis

Besides, India too has faced four major slumps in the last 70 years since independence. Looking at the rate at which the GDP recovers from such slumps –  a V-shaped recovery, W-shaped recovery or a swoosh shaped recovery is expected post the current pandemic driven slowdown. It can be clearly seen from the GDP growth (%) graph depicted below – the GDP growth rate plummets sharply during these economic shocks, however, it has strong resilience to bounce back the next year.

India GDP Movement and Annual Change

This is an econometric concept wherein most of the macro-economic indicators are a stationary time series. Even if we consider that the nature & severity of the current pandemic crisis across the globe, economy may take some time to reach back to the same trajectory. A swoosh shaped recovery is expected for India (if not a V-shaped or U shaped).

Different Shapes of Economy Recovery

Also, let’s look at the assets returns – the way they rebound post a crisis. Markets are not alien to a crisis. Globally, markets have survived various crises like natural disasters, wars, terror attacks, and have bounced back stronger. Despite the Asian Currency Crisis (1997), 9/11 disaster (2001), the Global Financial Crisis (2008), US Sovereign Rating Downgrade (2011), China’s Economic Slowdown (2015), and COVID-19 (2020), the Sensex has grown and moved up.  The performance of Sensex since 1994 is shown in the graph depicted below.

Sensex Movement Since 1994

Though, the other economic shocks as indicated in the graph may have had a limited geographical spread as compared to the current covid pandemic, it would be prudent to assume a steady and gradual recovery path in GDP growth rates and parallel in the asset returns across the globe.

So readers, its not the time to panic. It’s an opportunity – it’s the time to prevail! As investors – hold onto your horses – stay patient, don’t panic and stay invested. These are opportune times for India and it is likely to attract massive investments in times to come. The Indian economy has robust fundamentals and is more resilient as compared to its peers. The industry will reboot, new sectors will flourish, business models will change, the investments will grow and the consumption driven economy of india will surely chart the revived growth path in times ahead.

Certainly readers – ‘Stay Home! Stay Safe!’. But also – ‘Stay Calm! Stay Invested!’.

Dr. Tarunika Jain Agarwal Ph.D.

Alpha Research