Blunting the economic impact of a pandemic (What govt can do urgently)

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 Blunting the economic impact of a pandemic (What govt can do urgently)

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Read more on - Polity | Economy | Schemes | S&T | Environment

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• Grinding to a halt: Trade and commerce in India is grinding to a halt, partly due to fear in consumers' minds, and partly due to government decisions to clamp down on movement. A Task Force is also made under the Finance Minister now.
• Task Force: It can do many things.

1. Cash transfers - The most vulnerable workers (cab drivers, waiters, mall workers, domestic help etc.)can be given direct cash transfers.The PMJDY (Jan Dhan Yojana) has 33 crore accounts that can be used. Even the PDS network can be used for cash handouts. For the 23.53 crore ration cards, a transfer of Rs.1000 will be Rs.23500 cr. Hong Kong has announced a $10000 handout for all permanent residents, and US may do it with a $250 b package for all.
2. Loan guarantees - The pain has started in services sector (airlines, hotels, restaurants, tourism) and this will extend to manufacturing soon. Services are facing acute shortage of cash. Expenses have not stopped (salaries, rent payments, loan repayments). Banks won't give any concessions, and hence it is the government that has to give a loan guarantee now. (European nations are doing it). The idea is to ensure liquidity doesn't die down. So provide guarantees for working capital loans, provided firms promise not to fire workers.
3. Mortgage holiday - The EMI holiday can come as a big blessing for individuals and companies facing a loss of jobs or revenues. Govt must declare a 3-month EMI holiday for all troubles businesses. The RBI should declare regulatory forbearance in all these cases.
4. Tax Relief - The shutdown may prolong, and in that case, government will need to think of giving temporary tax relief to all businesses. These are abnormal times, and govt. must offer help by refunding all due amounts, giving all DBT payments right away, etc.

• How to finance all this: Financial resources of Union and States have to be pooled to build a national response. The way Kerala govt. announced a Rs.20,000 cr package is an example. Union govt. must use private sector talent to build right policies now.
• What about Union Budget now: The entire projections of this Budget are now unrealistic. The disinvestment target of Rs.2.1 trillion cannot be achieved at all. BPCL and Air India will remain PSUs. So, where to get the money from? Answer - Bond issue.
• Issue the bonds now: The large pool of domestic savings can be tapped via a tax-efficient bond issue. We can appeal to the Indian diaspora also. After 1998 Pokharan, India had successfully issued the "Resurgent India Bonds". SBI was able to raise $4 billion to fight the sanctions. Time to repeat it.
• Summary : Indian economy needs a comprehensive list of measures to fight the coming economic collapse.

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