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COVID-19 IMPACT: HOW TO SHIELD THE ECONOMY

As India steps up measures to contain Covid-19, ET assesses the economic costs. We speak to experts, economists and policymakers to put together a checklist of possible steps to mitigate the impact.

COUNTING COST

  • Loss of economic activity as cos down shutters
  • Loss of income as people lose jobs
  • Fall in exports due to global shutdown
  • Production disruption in many sectors
  • FY21 GDP growth may come down by up to 1 percentage point

WHAT THE CENTRE SHOULD DO

  • Big fiscal stimulus
  • Govt should borrow more immediately as private demand for funds is weak
  • Provide tax relief to troubled sectors
  • Interest subvention to boost consumption, real
  • Spend more on projects under implementation
  • Step up funds for healthcare

HELP COMPENSATE FOR LOSS OF INCOME DUE TO ENFORCED ABSENCES

  • Many businesses have had to send workers home
  • Businesses should be asked to protect jobs
  • Pay salaries to workers for the period
  • Govt should share burden

ONE-TIME CASH TRANSFER TO POOR LOSING INCOME

  • Many workers in non-organised sectors face loss of income


WHAT THE RBI CAN CUT INTEREST RATES SHARPLY

  • With inflation cooling, there is room to cut rates
  • Get liquidity moving to NBFCs to ensure lending on the ground

EASE ASSET CLASSIFICATION, CAPITAL NORMS
Bank NPAs could rise if lockdown intensifies.

Some likely steps:

Relaxation in asset classification norms

Few missed payments not to be classified as NPAs

Relax capital rules for banks

PROVIDE RELIEF ON LOAN SERVICING

  • Many businesses facing forced closure/demand destruction
  • Banks should reschedule principal payment
  • Interest for the period should be waived
  • Govt should compensate banks for loss

WHERE WILL FUNDS COME FROM?

  • Rs.12 L cr is how much half a percentage point relaxation in fiscal deficit target can release
  • Rs. 65k cr is how much an increase of Rs 5/L in tax on fuel can fetch
  • Rs.1L cr If 25% budgeted capital spending is used for this


WHAT STATE GOVTS CAN DO

  • Reduce disruption if there’s a lockdown
  • Ensure supplies of essential commodities
  • Provide income support to poor

Source: Economic Times, 18.03.2020

Link: https://economictimes.indiatimes.com/news/economy/indicators/covid-19-impact-how-to-shield-the-economy/articleshow/74682449.cms