Impact of Corona Virus on Trade based on 5 sector Circular Income model.

5 Sector Circular income Model:

The circular Income model generally tells us about about the expenditure, income to the
households and firms. There are many types of circular income models. 2 Sector model, 3 sector
model, 4 sector model, 5 sector model.
In 2 sector model, only firms and households plays the roles as income and expenditure is
common between them and cyclic process. In 3 sector mode, along with firms and households,
government also plays the role. In 4 sector model, along with government, firms, households,
foreign sector plays the role which includes imports and exports. In 5 sector model, along with
government and foreign sector, financial institution plays the role including firms and
households. Below is the pictorial representation of 5 sector circular income model.

COVID-19 has drastically created a huge negative impact on the economy as well as trade. The
economy of any country grows only when trading between them takes place. If there is no
trading, then there is no exchange of currencies and the economy doesn’t grow and starts to fall.
COVID-19 has not only impacted the trade of one country, it effected every country in the world
including China, India, USA, Australia, Italy and many more.
In the FY 2018-19, India’s foreign trade is estimated to be USD535.4Billions. It had got its
positive growth by 7.97% compared to its previous FY. Now in FY 2019-20, lot of financial
fluctuations have been noticed along with major impact of COVID-19. Lots of share prices of
many companies have been collapsed in many countries.
As COVID-19 is pandemic government is taking all necessary steps to stop spreading this
disease soon. When compared to this 5 Sector circular flow of income, COVID has created a
huge impact on households and firms due to its pandemic in nature.
Most of the firms have been shut down and there is lack of supply of goods to the households.
Since everything is shut down due to the COVID-19, there is no income generation for daily
wage workers. If there is no income generation this cyclic process would come to an end and the
economy of the country would collapse. So government started to supply all the necessary
materials to the households to stop the spread of COVID-19. Government under some critical
circumstance producing the goods that are necessary for the households.