By - Paisafatafat Blog
The 40-day lockdown imposed by the Government of India has led to a stall in considerable economic activity for the entire duration. The near standstill economy is beginning to reflect in the spike in unemployment rates, sales of petroleum products and a myriad other sectors. Economists are worried the damages caused as a consequence of this might be to a certain extent, quite irreparable.
The tussle that is going to ensue between health concerns and those related to earning basic level of sustenance, post the lockdown period is inevitable. In many ways, priority might be given to health care by political leaders in order to avoid getting swamped in an out of hand situation. With due credit to their intent, it is worthwhile to ask the question ‘where will the economy of the country swerve after this?’
First-hand exchange of ideas between leading economists of the nation has revealed some grim facts. With a completely withered first quarter to a somewhat tottering third quarter this year, they estimate that GDP growth might dwindle from around 5.5% in 2019-20 to -0.4% in 2020-21, probably the maximum decline the country has seen since 1979-80.
Experts go on to predict that a plunging GST will impair the Centre and states leading to a swell in fiscal deficit, although some services related to health and ration delivery might continue to run.
The Way Forward
The only way out of this slump is to start MSMEs, construction work and getting people to go to work, at the earliest albeit with the maximum possible safety measures in place. Manufacturing and service sectors too need to be able to open their doors with immediate effect. The best way to do this is to utilize the rail network as best as one can in the given circumstance.
Secondly, the fear of bad loans is leading banks to limit credits. The finance ministry should make initiatives to help MSMEs and construction sectors to get back on their feet with adequate funding and at the same time assuring banks of a back-stop facility of at least 15% of such loans in case of default.
State governments must be given greater assistance for at least six months. This will ensure a rise in both demand and supply, curbing inflation.
In order for the economy to have any hope of raising its head again, the lockdown has to end and enable people to earn a livelihood.