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Impact Of Corona Virus On Indian Economy

The COVID-19 pandemic has impacted the world at a dangerous scale and speed. The human expense of the coronavirus will be incredibly high. More regrettable, it will wind up having a long tail as well. Both Global and Indian rating agencies have a unanimous opinion that the COVID-19 pandemic will be an economic tsunami for India.

A 2019 joint report from the World Health Organization (WHO) and the World Bank assesses the effect of such a pandemic at 2.2 percent to 4.8 percent of global GDP (US$3 trillion). This was estimated well before the World was affected by COVID-19.

India is currently amidst a 21-day lockdown period to prevent the spread of the virus. This lockdown was announced by the Prime Minister and began on March 25. The fallout of the move will spill over to financial year 2021, which begins on April 1.

As for its results on the Indian Economy, we can draw an extrapolation from the Chinese Economy. The Chinese economy dwindled by 10 percent of GDP in the first quarter of 2020. The estimates for the US and Europe will be in the same magnitude. There will be a double-digit drop in the first quarter.

Regardless of whether the Global Economies will revive themselves, Indian MSMEs might have to pay a large price in the current situation. Most of these organisations are not large enough to absorb the shock of a pandemic like this. In addition to this, these businesses have downsized their operations while still paying their employees and meeting the expenses of power, taxes and other utilities.

In order to ease the situation, the Prime Minister has announced the establishment of an Economic Taskforce. Accessible information shows that MSMEs utilize as much as 110 million individuals; requesting that organizations continue paying during a lengthened lockdown cannot be maintainable arrangement in the medium-to-long haul.

Alongside handling healthcare on a war infrastructure, the government will have to focus on the impending financial emergency. It has been called attention to by some American economists that a downturn could call upon itself; as more cutbacks occur, there will be lower demand, prompting more businesses to fail. The government needs to step in to stall this downward spiral.

The Finance Minister has declared a couple of changes by extending tax filing deadlines. Likewise, the government has raised the threshold for starting insolvency proceedings to Rs. 1 crore. Apart from this, bank charges have been lowered for digital trade transactions for all trade finance consumers.

Former RBI governor Raghuram Rajan says that they need to keep small and medium firms which have suffered shock after shock from closing down if they are viable. This needs to be a careful decision as we have limited resources but we need to keep the viable ones alive. We need bridges between now and then. We need ways to get money to the most vulnerable (the poor, the migrants) so that over the period of the shutdown they can keep body and soul together.

The key is to ensure a temporary shock doesn’t turn into a more permanent shock for the businesses in India.

The Government has announced certain measures for Development and Regulatory Policies as well as Statutory and Regulatory Matters.

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