COVID: 5 Years On...

THE TAKE 

Five Years After COVID, The Economic Euphoria Is Wearing Off

It has now been five years since the COVID-19 pandemic struck, changing the trajectory of our lives in more ways than one.

The World Health Organization (WHO) declared the pandemic on 11 March 2020.

Millions have died since then, and many—including some I know—continue to suffer the aftereffects of contracting the disease before vaccines were available.

This is a good time to ask: have we learned the right lessons from the crisis? And have we moved past the economic euphoria that characterised the post-COVID recovery?

COVID-19 locked us in our homes in a way never seen before.

At the same time, the virus triggered a remarkably coordinated response from the healthcare sector, leading to the fastest vaccine development in history, aided by cutting-edge technology, including software innovations.

Governments across the world injected massive amounts of stimulus funding into economies, which initially drove inflation and later sparked a wealth effect in stock markets.

The Impact Of Post-COVID Economics

Since 2020, inequality has widened, with the world’s richest 1% now earning a larger share of national incomes than before the pandemic.

Interestingly, after the 2008 financial crisis, income gaps had actually shrunk.

The past five years have also seen an unprecedented surge in digital participation, creating new channels of financial power in markets.

This acceleration was driven by the app economy, which fuelled unsustainable speculation, consumption, and borrowing—alongside the rise of new financial trends, including cryptocurrencies like Bitcoin.

The behavioural changes in personal consumption, influenced by this period and amplified by inflation, are something we are still grappling with—and likely will for years to come.

For example, high inflation has been a key issue in several major elections worldwide, including in the United States and India last year.

A Reuters report notes that inflation peaked in many countries in 2022, driven by post-lockdown spending, government stimulus packages, and shortages of labour and raw materials.

Meanwhile, after governments borrowed heavily to protect welfare and livelihoods, global government debt rose by 12% points since 2020, with steeper increases seen in emerging markets.

To combat this, central banks have been raising interest rates. While the US and Europe began pulling back rates last year, India only started doing so last month.

Interestingly, India faces the unique challenge of reducing interest rates without triggering another debt and borrowing frenzy.

The Larger Shift In Economic Behaviour

We are still shaped by the bull market years of the past few years, particularly the post-COVID consumption boom, which began flattening globally more than a year ago.

Yet, many continue to believe that borrowing-fueled consumption and financial market gains are here to stay—especially younger professionals who entered the workforce in the last five to six years.

Adjusting to a pre-COVID economic reality may not be something most people desire.

After all, who wouldn’t want to live in a world where we can keep splurging on stocks and pizzas via slick apps that encourage us to buy and consume more than we need or can afford?

A rising stock market gives us the feeling that our wealth is growing, even though incomes stopped rising meaningfully a few years ago.

But, as always, gravity tends to pull us back.

These moments serve as a good reminder to acknowledge this reality, even as we right-scale businesses and the consumption that drives them.

We have already seen the stock markets pull back, accompanied by the tightening of loans and the slowing of growth, in companies and the economy.

The Changing Face of Healthcare Perception

Meanwhile, the public perception of the healthcare industry is now largely defined by new innovations in weight loss treatments—and, of course, the companies profiting from them.

Life-saving vaccines, which once dominated global attention, are now a distant memory, though they were instrumental in driving up stock prices of pharma giants like Pfizer, Moderna, and AstraZeneca at the time.

And the United States under the Trump administration has now said it is pulling out of the World Health Organisation, an organisation it feels did not anticipate or do enough to manage the pandemic.

Life, it seems, has come full circle.

CORE NUMBER

$1.3 Trillion

This is the total value erased from Indian stock markets since the start of 2025, as foreign investors pulled out $15 billion from equities. This outflow is on track to surpass the record $17 billion in equity sell-off recorded in 2022, Bloomberg reported. India’s GDP growth is projected at 6.5% for FY25, the slowest in four years, with over 60% of Nifty 50 companies seeing profit downgrades last month. Despite valuations cooling to 18x forward earnings (from 21x in September), Indian stocks remain costlier than other Asian markets. Meanwhile, fund flows are reversing towards cheaper Chinese equities, now rallying on AI-driven optimism.

👥 THE TEAM

✍️ Zinal Dedhia, Salman SH | ✂️ Rohini Chatterji | 🎧 Joshua Thomas