Extraordinary Times Call for Extraordinary Measures

No doubt, India’s tally in ‘Ease of Doing Business’ index has improved a lot, but that is not enough. In the post COVID19 extra ordinary situations, India requires extra ordinary measures. Some states like UP has already shown some ray of hope by suspending major labour laws for the next three years. Those kinds of steps will be required at the national level too.

By Akanksha Tiwari

New Delhi, May 09, 2020:

It's not wrong saying that the Indian economy is going through a phase of downfall and the reason is very well known, that is lockdown in the nation to control the outbreak of coronavirus.

Factories are shut, unemployment is increasing and businessmen are uncertain about their future of business and overall these conditions are enough to give a shock to the economy.

On Friday, Japanese investment bank Nomura and Goldman Sachs has lowered India’s economic forecast saying, ““We have cut India’s 2020 (calendar year) GDP growth forecast to -5% vs -0.5% earlier. For FY21, we have lowered our forecast to -5.2% vs -0.4% earlier. The downward revision reflects extended lockdown and recent evidence that the likely hit to growth during April-June quarter will be much worse than our earlier expectation,” Sonal Varma, chief economist, India and Asia (ex-Japan) of Nomura, told a leading English daily TOI.

The global ratings agency Moody’s Investors Services has already estimated zero growth for the current fiscal year. Moody’s Investors Services cut India’s GDP growth forecast to zero for 2020-21 from the earlier 2.6%, citing the impact of the lockdown. It also detailed factors that could lead to an upgrade and a downgrade in the country’s sovereign rating.

“A downgrade of India’s rating would likely occur if we expected its fiscal metrics to weaken materially. This would probably happen in the context of a prolonged or deep slowdown in growth,” the agency said in a report.

The lockdown announced by the government has stalled economic activity with airlines, hospitality, retail, manufacturing, restaurants and the broader services sector bearing the brunt.

The economy needs to be paused until the nation sees the control over corona outbreak but that doesn't mean the economy is into permanent crisis and things will be back to normal as soon as lockdown will be over because there haven't been any change in international and national policies related to the economy.

The predictability says that: 

The economy will actually boost which will become a next big step for government and the big steps will be taken just after controlling of coronavirus outbreak, to do so the government may take steps like it will provide incentives to companies and invest more in development activities which will boost companies growth, decrease unemployment, increase demand and increase productivity, and also a growth in those sectors which has a lot of potential but their importance was not known to the nation so far 

Not just from the side from the fiscal policy but even the monetary policy will have to take a step to increase the supply of money by deficit financing in the market to increase production and purchasing capacity of an individual with that a credit spread has to be checked and narrowed so that any cut in repo rate can lead to its proper transmission.

Now if we compare India with other nation where people are fighting with corona virus-like USA, Italy, Japan and China and many more we can say that the disaster due to coronavirus is less in India compared to this nation and the control over outbreak is more due to timely action was taken by the government so the chances are that Indian economy will recover before other countries economy who are affected from coronavirus and this early recovery will be advantageous to the Indian economy in the international market.

Already many countries’s faith in China is getting worse and they are calling off their companies in China and asking them to get back, in that case chances are that these countries will look toward India for their business setup, and Indian comparative trade and business advantage over China may increase in the upcoming time.

No doubt the criticality today is saving of lives of fellow citizens in view of the COVID 19 pandemic, claiming huge numbers and causing innumerable loss of lives.

However, in order to sustain the lives so saved, post lifting of lockdown, there will be a greater criticality staring at these citizens, namely the livelihood. The State of economy, as it is prevailing, and the aspiration to build a five trillion economy make it imperative to pull all plugs to ensure its revival and set a pace that is essential.

This necessitates inviting maximum foreign investments by creating an absolutely positive and supportive atmosphere and also by reducing the punitive rules and stiff measures for doing businesses, and increase foreign exports. The Make in India will succeed, when we will make for positive work environment, with less compliance, less tax burdens and easy loaning and sanctioning processes.

No doubt, India’s tally in ‘Ease of Doing Business’ index has improved a lot, but that is not enough. In the post COVID19 extra ordinary situations, India requires extra ordinary measures. Some states like UP has already shown some ray of hope by suspending major labour laws for the next three years. Those kinds of steps will be required at the national level too.

Image courtesy - India lock down Twitter iNews247

Akanksha Tiwari is Economics Faculty at Chahal IAS Academy and Guest Faculty of Economics at various other IES and IAS Academies; A Post Graduate in Economics from Loyola College Chennai; Economic Consultant; Speaker at Global Investment Immigration Summit 2020 and Various Other Events; Writer and Lyricist in Entertainment Industry;

Disclaimer: The opinions expressed in this article are the personal opinion of the author. It doesn’t reflect the views of the Institute, he is associated with. Also, the facts and opinions appearing in the article do not reflect the views of Indian Observer Post either, and Indian Observer Post does not assume any responsibility or liability for the same.