With the number of swine flu fatalities in India touching double figures on Tuesday, panic is slowly setting in.

Schools, malls and cinema halls in Pune are already shut and nearly a thousand people across India have tested positive for the virus.

The H1N1 flu outbreak, declared a pandemic on June 11, has spread around the world since emerging in April and could eventually affect 2 billion people, according to WHO estimates.

But is India ready to tackle the outbreak?

More supplies of flu drug Tamiflu and testing kits are being imported and private hospitals are being asked to help state-run hospitals cope with a surge in people rushing to get tested.

Some also feel that the media hype over swine flu is causing needless fear.

On Tuesday, the Hindustan Times said the common flu could be killing an estimated 572 Indians every day, much more than H1N1 flu -- in most cases, infection has been mild and patients have fully recovered.

So is there really cause for panic?

- Marie Diron is senior economist at Oxford Economics. The opinions expressed are her own -

A swine flu pandemic would affect the economy via various channels involving supply and demand.

On the supply side, infection and death imply that employees would be unable to go to work. This is what most people think about when they think about swine flu’s economic costs.

But the demand channels are likely much more powerful. Fear of infection would keep people away from airports, train stations, restaurants, cinemas and shopping centres. This would imply cuts in travel and tourism and consumer spending.

In addition, uncertainty about the impact and duration of the pandemic would dampen investment, while financial markets would probably experience renewed tensions with spreads between policy and market interest rates rising again and share prices negatively affected.

To get a quantitative estimate of the impact, we need to make a few assumptions. First, based on the experience of previous pandemics and developments so far, we can assume that 30 percent of the world and UK populations would be infected and be unable to go to work for two weeks. We also assume a death rate of 0.4 percent.

Second, we look at the experience of the SARS outbreak in Asia in 2003 to calibrate the likely cuts in discretionary consumption and international travel. This episode showed significant reductions, of around 20 percent and 60 percent respectively. In the current environment of rising unemployment and needs of balance sheet repairs, households could cut discretionary consumption even more sharply.

Under these assumptions, the GDP loss during the six months of the pandemic would amount to around five percent in the UK. This means that GDP growth in 2010 would be at least as bad as in 2009.

However, and although once the pandemic is over the economic bounce back would likely be less sharp than post-SARS, chances are that, by 2011, GDP growth could be above our baseline forecast and the economic loss would be gradually recouped within around three to four years. CPI inflation would likely turn negative for a few months but would rise as pent-up demand is realised.

There is a risk that swine flu tips the UK and the world economy into deflation as the pandemic would hit at a time when businesses and banks are still reeling from the economic crisis.

Rather than catching up on postponed spending, households may raise savings for a longer time, while companies that are already fragile after the recession may succumb to this new shock.

We estimate that under such a scenario the UK and world economies would fall into deflation. UK CPI inflation would fall to around minus one percent throughout 2010-12 and UK GDP growth next year could be as low as minus seven-and-a-half percent. With the government budget deficit already at sky-high levels and the Bank of England’s interest rates pretty much at zero, there is little that public authorities could do to try to buffer the impact.

– James Saft is a Reuters columnist. The opinions expressed are his own –

Besides being a human tragedy, a deadly pandemic is, quite literally, the last thing a global economy suffering a huge drop off in trade and activity needs.

To be very clear, we’ve no idea how severe or widespread the evolving outbreak of a new form of swine flu will be and indications that it seems to be becoming milder as it travels from Mexico are reassuring.

You only need to look at photos of deserted streets, shops and theatres in Mexico City to get a sense of the hit to consumer demand, but the potential for damage to production and distribution is profound too.

One guide for the impact of a dire pandemic is the experience during the Spanish Flu, which spread rapidly across much of the world during 1918 and 1919. About a quarter of the global population was infected and somewhere between 50 and 100 million people lost their lives, according to estimates.

Economic data from the time is woefully thin, but the period of the outbreak in the U.S. corresponds almost exactly with a period the National Bureau of Economic Research deems a contraction.

Businesses of all sorts were badly affected, from life insurers, many of which had to suspend dividends to deal with higher claims, to a telephone company in Tennessee which had so many operators out sick that it had to issue a plea for fewer “unnecessary calls”.

Wages were probably pushed upward by the pandemic, according to a survey of studies of the flu by Thomas Garrett published by the St. Louis Federal Reserve. Click here for PDF.

This is similar to what happened to England following the Black Death, when agricultural labourers were able to make huge strides in pay.

Ironically, Spanish Flu was so called because wartime censorship was less in Spain, leaving people with the false impression that it originated or was more prevalent there because there was more coverage of the illness.

The lack of censorship today and current communications capability probably argue that the economic impact will be both greater proportionally and front loaded. If the flu spreads and is deadly, people will know and their reaction will be to hunker down. We could therefore have a magnified economic effect compared to the actual medical danger.

And just as information spreads more quickly now, the global economy is more tightly knit and the supply lines and chains of most businesses are far more efficient, and as a result more fragile than 90 years ago.

THERE IS NO GOOD TIME FOR A PANDEMIC

Estimates of the economic toll of a pandemic vary widely. The Congressional Budget Office has estimated that another Spanish flu would knock five percent off of U.S. gross domestic product.

The World Bank in 2005 put the global cost at $800 billion for a global pandemic, while the U.S. Centers for Disease Control and Protection in 1999 put the domestic cost at about 1.5 percent of GDP.

So, if there is a pandemic, we can expect it to pull any green shoots of recovery up by the roots and send economic activity and confidence tumbling yet again.

It would also represent yet another claim, really an imperative, on already strained government resources. If a country weakened by the economic crisis were to be particularly badly hit, it could damage that government’s ability to sell debt or drive its currency lower.

The impact on the financial system, however, might not be so bad, according to a study of the Spanish Flu by the Philadelphia Federal Reserve.

The payments system continued to function throughout the crisis and, at least as measured by the number of bank failures, the period of the pandemic was not a bad one. That said, the banking system in 1918 was almost certainly in nothing approaching the perilous state it is today.

Bond and stock markets also continued to function, with volumes in stocks actually increasing. Almost unbelievably the Dow Jones Industrial Average ended 1918 with a gain of 10.5 percent, setting the stage for a 30 percent post-war rally in the early part of 1919.

That could be because government censorship left investors in the dark, but after all a horrific European war was ending and the seeds of the 1920s boom were being sowed.

All of what will happen now however, is fundamentally unknowable and the best we can do is to hope that, unlike subprime, this crisis is contained.

- At the time of publication James Saft did not own any direct investments in securities mentioned in this article. He may be an owner indirectly as an investor in a fund-