Indian economy is also at an attack with the COVID-19 pandemic,At the time of a worldwide crisis when the entire world is facing a pandemic. Other than taking proper precautions and taking care of our mental and physical health, what we need to seek for right now is a streak of silver lining amongst the clouds and try our best to look out for ways by which we can save the crippling economy.
What are the various ways to revive the economy?
The Prime Minister’s Citizen Assistance and Relief in Emergency situation was constituted and this relief fund was created with the objective of providing for medical facilities; and also to provide relief to those people who have been harshly affected due to the economic impacts of covid – 19. This relief fund is much needed because the 200 crore surplus of our country alone would never be sufficient enough to match the amount that is needed to overcome the negative impact that covid 19 would have on our economy.
Contributors from all around the country are coming forward so that the situation can be improved and disruption caused in the lives of millions of people can be ephemeral. If proper executions of all the strategies and proper utilization of the 1.7 lakh crore (that is expected to be collected from the relief fund) is done, then India has a chance of getting back to its gears within a short period of time. But if the virus isn’t contained within this lockdown and it extends to a higher period of time, it would be very difficult for us to revive the economy.
The JAM trinity:
The JAM trinity refers to the mechanism, through which money is transferred to people; which includes linking of Jan Dhan accounts to Aadhar and mobile and then giving them the e – receipt after the money is transferred. This initiative is extremely important. We need to understand that social distancing is a privilege. Not everyone can afford to stay at home during the lockdown and not worry about the next day’s food. It is important for the government to transfer benefits into people’s accounts to ensure that they need not step out of their house in search of livelihood. Initiatives should be taken by the government to ensure that this benefit actually reaches out to everyone – even the poorest of the poor.
Distribution of food:
The Food Corporation of India currently has 58.497 million tons of rice and wheat. It is massively overstocked as of now. This can be used to our advantage. In order to ensure that everyone gets the minimum food required to live their livelihood, approximately 21.41 million tons of wheat and rice can be distributed all over India through public distribution system (PDS).
Apart from the daily wage labourers the people who are in the most dire and vulnerable situation are the elderly people. Kerala and West Bengal governments have made an initiative to pay two months of pension in advance. If the Indian government, as a whole, too takes these measures then these people will face fewer difficulties.
For the sake of small businesses and entrepreneurs, and to reduce burden on them and help small industries grow (thereby helping industrial growth on a large scale); the rate of GST could be lowered. But this strategy has a lot of other limitations. Indian government is very much dependent on tax. It was seen that earlier in 2019 – 20, the direct tax collected was not upto the mark. Therefore, most of the revenue of the government came from indirect tax or GST. It is expected that same situation would arise in 2020 – 21 also. Reducing or postponing GST payments, might have an adverse effect on the revenue prospects of the government. So, this is a controversial step.
Will all these actually work for the economy ?
Before we start analyzing if India will be able to employ and execute these few named strategies as mentioned above, we have to consider the current situation of India, which needless to say, has a lot of uncertainty prevailing in it. We still do not know if the virus will be contained within the said 21 days. Even the rate at which the virus will start spreading tomorrow is not known to us. We can predict and take precautions – but that is all. With so much of prevailing uncertainties, let us look into the current case scenario.
[GDP annual growth rate as of different years as stated]
[India was already facing an economic slowdown even before covid – 19 came to the scenario]
India is currently going through its 21 days national lockdown period. Panic and shock has already been spread to all sections of the society with everyone trying to stock up on essentials. On the economic perspective, the daily wage labourers, freelancers and small equity based companies are facing the worst hits. This is expected because suspension of economic activities for 21 days would surely have a horrendous effect since there will be no revenue generation in our country for 21 days.
Each and every sector has been hit quite badly already. Because of economic relations, all of these sectors are intertwined together and an adverse effect on any one sector can lead to multiple and permeable adverse effects to other sectors. For instance, if taxis and cabs stop working in Kolkata, there will be an adverse effect on petrol and diesel. Furthermore, the taxi drivers will remain unemployed. This is the negative multiplier effect. Similarly, there are farmers who can’t sell their products, horticulture and bee hives are being destroyed and the list goes on and on. Therefore, it is fair to say that at present, there is disruption in all the sectors of the country.
What does this call for the economy?
This calls for immediate action. It is extremely important for our government to formulate plans and analyze tradeoffs as early as possible because the economic impact that the covid – 19 will have on us might be so bad that we might have to take several years to try and revive the economy. If the virus is controlled within 15th April 2020, which is highly unlikely, then the toll on us will be far less. But if that doesn’t happen, the country will face a huge economic shock.
Supply chains which are already disrupted now will be almost completely damaged. Massive unemployment will occur and shortages will start to occur. Although we have been promised of essentials, it is important to understand that stored goods will finish. Production of our necessities is also very much required. Yet, the biggest problem is that, for proper and smooth production, we need a proper functioning ecosystem – which is something that has already been disrupted. Therefore, shortages of necessities will occur if this virus stays in our country for too long. This will further result in food riots, violence and endless struggle of the common people.
Furthermore, the biggest social problem that India will face is unemployment. The unemployment rate as of financial year 2017 – 18 was 6.1%. With the current suspension of economic activities, 2% rise in unemployment is expected as of this year. To reduce the rate of unemployment, our government needs to shift focus. To labor-intensive technology, invest more in the agricultural and industrial sector and focus more on services that generate employment. Use of labour intensive strategies instead of advanced technologies in certain (or most) sectors, might bring a reduction in output. But such reduction needs to be sacrificed for the sake of the benefit of the common people and the rise in the economy.
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