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 1.12 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 1 L 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