The various stimulus packages being administered by governments to stimulate consumer demand, need to be tailored to the needs of each country and the economic distress being faced by citizens (“UK retail to lose further 5,000 jobs in blow to economy,” July 9, Gulf Today).
In developed countries whilst digital payments can facilitate transactions, the large number of job cuts can compress purchasing power. The British Fashion Council has just warned that 240,000 jobs are at risk in the fashion industry in Britain. Again, the UK shed 650,000 jobs during the lockdown, according to the Office for National Statistics Office.
In developing countries in South Asia, like India, there is limited cash with the bulk of the population, especially in smaller towns and villages. The salaried classes are having their salaries reduced or stopped completely, depending on the fate of the industries they were working in. About 80 million migrants who trudged back to their homes are without jobs. A study in Mumbai slums shows that about 47 per cent of the slum dwellers had no income during the lockdown and 70 per cent of them had to take loans for basics like water and rations.
Farmers are unable to sell their entire produce due to non-availability of labour from the adjoining states and the closure of many wholesale markets due to the lockdowns. So, even if these people had internet access or credit cards, they would have scarce money to spend. The issue of low consumer spending is also exacerbated in many developing countries because they do not have unemployment, medical or pension benefits for their citizens. They have nobody to turn to in distress.
In view of the cash shortage and the fears sparked by the unchecked spread of COVID-19, most people across countries and income classes are spending on essentials only. They are postponing all luxury and pleasure spending. In dire situations like the current crisis, cash is king. Public confidence to spend again, will be kindled only if the disease starts ebbing or a vaccine is discovered expeditiously.