COVID-19: What Can The Govt Do to Tackle This Economic Shock?
The lockdown has had a major impact on the Indian economy where the usual rules of a fiscal economy don’t apply.
Most global crises follow an unsaid pattern – first denial, then acceptance, which is followed by a poor response and execution in order to tackle the said crisis.
India has followed suit, suffering blows on the economy after a country-wide lockdown was enforced in a measure to contain the novel coronavirus outbreak.
A drastic step like a complete lockdown is taken bearing in mind that the move will not have any major negative effects on the nation’s economy and the weaker sections of society.
Following PM Modi's request for a 'Janata Curfew' on Sunday, 22 March, several states enforced a complete lockdown till 31 March to curb the spread of the coronavirus. But while enforcing the lockdown, the government probably forgot that nearly 80% of India's informal economy comes from daily wage labourers.
Where’s the Reassurance?
The government did little to reassure these daily wage labourers about their income, thereby indirectly contributing to the mass panic wave that has taken over the country.
The government should have reassured them of a steady income by direct cash transfer through an universal basic income scheme. Simultaneously, companies can adopt forbearance and defer debt payment while banks supply the companies with a working capital.
Western countries like USA and France announced economic reforms at one go while in India, the RBI (Reserve Bank of India) is rolling out reforms and measures very slowly.
People are demanding that RBI cut rates by at least 2 percent, to help them sustain, which translates to the fact that the government needs to let the credit line slide in order to absorb this economic shock. Firstly, the government has to supply the underprivileged monetarily.
In this lockdown, which is a war-like emergency, the usual rules of a fiscal economy do not apply.
If this lockdown continues for a month without any strong and quick economic measures then the GDP will suffer a 1.5 crore rupee loss.
The government can also involve the private sector which is willing to help out in more ways than one, and has the logistical bandwidth to help. The government has a plethora of options to choose from – liquidity pipeline, debt payment deferment, tax payment deferment, pushing the financial calendar. The government just needs to pick and choose which is best suited for the economy, because while the government has to focus on saving a thousand lives, they also need to make sure that lakhs of lives (dependent on the economy) which are at stake, are also taken care of.
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