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The Fight Against Covid-19 And the Fiscal Measures Taken in India So Far

The article compiles expert opinions on what the government of India and the financial bodies should collectively do to abate the economic crisis caused by COVID-19 along with a slew of measures that have already been rolled out as part of an initial stage treatment.
Fight against Covid-19 and the-Fiscal-Measures-taken-in-India

To help the poor – especially migrant labourers, daily wagers and informal workers – cope up with the economic impact of the annulment of daily work imposed by the nationwide lockdown in tackling the spread of the COVID-19, the Indian government has announced a fiscal package of Rs 1.7 lakh crore. This is a noble step, but not withholding the present predicament that has also fuelled significant volatility in asset prices including public-traded debt and equity, according to KPMG India.

In the light of injecting impetus into economic recovery the Government might consider:

  • A relief programme to identify and drive stressed assets into the system.
  • The pandemic might point to India’s career as an alternative manufacturing base, which in turn calls for reforms across the value chain, beginning from approvals and clearance to land and labour reforms.
  • Introduction of Tax-free bonds as far as the infrastructure sector is concerned.
  • Lenders including Banks and Non-Banking Financial Companies should contemplate:

  • Evaluation and distribution of relief and revival packages to sectors that have been mostly hit like hospitality, tourism, real estate, small-scale industries etc.
  • There is a chance of multiple companies becoming bankrupt if lending bodies do not renovate the operational structure. Experts suggest the introduction of new structures/products at competitive pricing targeting affected businesses having a strong management body.
  • Now let us look at what the Financial Regulatory Bodies and the consulting giants in association with the Indian Government have already done or are thinking of implementing shortly as far as reviving the economy with stimulus packages and policy renovations are concerned.

  • The RBI had already introduced a one-time restructuring of existing loans to MSMEs earlier this year. This means MSME’s having loan liabilities not exceeding INR 25 crore till January 1, 2020, are eligible to restructure their account before December 31, 2020, and be classified as “standard assets” till the date of the implementation of the restructuring. In the light of the current scenario caused by Covid-19, the RBI might consider extending the dates and relaxing some terms and conditions thus mentioned.
  • The repo rate cut to 4.4 per cent, implemented by the RBI, along with cutting Cash Reserve Ratio for all banks by 100 basis points have been done to release Rs 1.37 lakh crore across the banking system.
  • A moratorium or deferment of EMI/interest for 3 months between 1st March and 31st May 2020 have been made applicable for credit card payments, retail term loans, Agri-based loans, corporate clients and financial inclusion businesses.
  • The Ways and Means Advances Credit limit which the RBI extends to states and Union Territories to balance treasuries have been increased by 30 per cent to assist the respective governments to tackle the fight against Covid-19.
  • Export realisation and repatriation is a process whereby businesses with overseas sales of goods are required to repatriate the balance within 9 months from the date of the exports. This duration has been increased by 15 months.
  • Despite all the measures that have already been introduced, Indian businesses of almost all sectors are looking forward to a fiscal stimulus. The Federation of Indian Chambers of Commerce and Industry seeks a revival fund of Rs 2 lakh crore. DK Aggarwal, President of PHD Chamber of Commerce and Industry feels that the government should set up a fund of Rs 25,000 crore to assist the MSME’s fight this battle and once again find a balance between lives and livelihoods.

    Stay tuned for more information on the policies and reforms that would reshape the mode of businesses in the coming days. Learn about what businesses need to do to stay in the game, in terms of renewing approaches, utilizing new policies, and reviving the supply chain.

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