The Covid-19 pandemic is expected to bring about drastic changes in our economy, both macro and micro. Money, as we understand it is, not going to be the same again, neither is going to work. As we move to a more digital economy to support more and more contactless payments and exchange of money, the first of many thoughts I would like to share is how cash is no longer king in a Covid-19-affected the world.
‘Lakshmi Chanchala’
It’s an Odia saying implying the fickleness of fortune and wealth
Circulation of money, especially cash, has taken a hit due to the outbreak of the pandemic. While the exchange of goods and services for money has been a part of human society since time immemorial and money has more or less always been in the form of cash payments, this culture is expected to change massively over the next few years. In Odia, there is a saying, ‘Laxmi Chanchala’ meaning that the money, represented by the Goddess of Wealth, Lakshmi, is always to be circulated for the economy to continue to be functioning well. Money is liquid and keeps changing hands and circulation of money is the oxygen for the economy and society.
However, Covid-19 has toppled this age-old tradition and the circulation of money has come to a standstill. Apart from lack of real cash in the system, systemic spending by people on non-essential goods will see a significant drop over the coming years. People sometimes do not have cash in hand as they did before because of unemployment due to lockdown and trimming of firm sizes and wage bills. Others who have money and some savings or continuing sources of income fear to go out and spend that money. They keep expenditure to the bare essentials – food, water and medicines. The materialistic wish-lists of people have taken a back seat. People have cut back on spending on things like a fancy dinner or a trip to some destination out of forced necessity whereas in other cases such as purchase of non-essential items, it has been more of a conscious choice because of fear of the unknown and uncertainty regarding the future. Many people are cutting down expenses during these tough times and saving because of a sense of fear. Many are also living on shoestring budgets. Many are rightly not using cash transactions because that can be one of the causes of the spread of the virus!
As a result, all the activities like eating out, shopping, tourism, hospitality, cab aggregators, delivery people, online shopping forums, adventure trips and travel have come to a halt or are churning out very low-volume business. People are coping with the stress of being at home, keeping mentally stable and preparing for the post-Covid-19 world. The stock market reflected the fear of the people about the unknown as some companies shrunk to decade lows in fear of how the Covid-19 situation will pan out.
Another example is that of Akshaya Tritiya, where usually men and women would have splurged money on buying gold and jewellery during regular non-pandemic times. But this conventional sacred activity has been impeded and almost drew no attention because of the scarcity of cash and uncertainty regarding the future. The massive mansions, plush jewellery shops and packed malls are all locked down; and people are expected to stay away from the markets in the near future.
The moral that we can derive from all this is that circulation of money is essential for the market to thrive. Money circulation has to begin soon as it, much like oxygen, is the life source on which the entire economy runs; and only then can we see the first signs of recovery post Covid-19. It will take time, but people will slowly go back to spending, albeit in a safer fashion and more digital. But the gradual relaxation and pumping of money will give breathing space to small and medium businesses. If we take the right policy direction, India has the potential to emerge a winner in the post-pandemic world.
(Dr Samanta is MP, Kandhamal, and founder, KIIT & KISS)