A world like never before its aftermath
Economy is completely debacle by covid-19 indeed, humans can win out from this pandemic but its traces on economy will last longer than policy makers expect. Be it the unemployment, GDP numbers, fiscal deficit, mismatch between demand and supply, loss of revenue to public/private enterprises, stock market crash all these sectors shattered by this pandemic in such a way that their revival is still dubious. Bringing the economy back on track is going to take concerted policy effort and will require measures other than Fiscal and Monetary policy. For overcoming the slump resources must be employed in an intelligent manner to boost economy. According to economist’s India’s, GDP rate is already at a decadal low and any further dent in economic output will bring more pain to workers who have seen their wages declined in recent times.
Economic activities moves in a vicious circle as consumption is one of the most important economic activities which is worst affected by this and it ultimately affect production and distribution too. hence, the cycle of generation of national income stopped. It is for this reason that an economic package for the economy emerging out of the lockdown requires stimulus enhancing demand across the economy. The best way to have done this would be given the direct benefit to people and business but irrespective of this the current government’s economic package lacks in this regard and they used current economic crisis as an opportunity to make India self–reliant even tries to bring structural economic reforms in the system. No doubt that these measures are real structural reforms which India needs since a long time.
In the current economic crisis India needs to push the demand immediately for which policy makers have been to spend on infrastructure. Infrastructure spending uniquely creates structures that raise productivity and extends spending power to the section of the population most affected by the lockdown.
Now the most important question arises that from where the money comes to the government for tackling down this problem as already the fiscal deficit is high from the budgeted number that 2.7 percent as revenues of government cannot be raised by increasing taxes as businesses are already badly hit by the disruption. Taxing the salaried class will further drain consumer’s purchasing power.
Even if the government shed the fiscal conservatism means as government earlier fixed the limit of 2.7 % of fiscal deficit, money will be tight because of loss of revenue due to fall in economic activity. Just distributing a small amount of money to a larger number of people will also not stimulate the economy, than from where will the money come from an important question arises as revenues of government cannot be raised by increasing taxes as businesses are already badly hit by the disruption. Taxing the salaried class will further drain consumer’s purchasing power. Hence, it calls for a large increase in government borrowings including substantial amounts from the RBI at a lower market interest rates what we need is a massive fiscal response built around direct state spending.
This is the high time when nations around the world must realize the directions of investments instead of investing in defense the hard earned money of tax payers. it should be utilized by public authorities in infrastructure development though it not only fulfilled the long pending demand of society but on the other side stimulate the consumption expenditure or even bring the equity perspective as general public also get benefitted. It increases the supply of essentials which eventually, resulted in low inflation rates.
COVID-19 has been pushing the whole world to new extremes ever since its still mysterious appearance in China. Its highly contagious nature has forced almost 80% of the world's population explore new survival strategies. The WHO and national governments have advised the people to shut themselves in to evade infection and a consequent threat to life. Although people of Europe and America initially did not pay any heed to the warnings and advisories and kept the business of life going as usual, the world seems to have acknowledged, lately, the enormity and gravity of the situation. People have come to embrace the ethics of solitude, social distancing, and quarantine as a necessity and social responsibility, bringing the hustle and bustle, clanking of the machines and whizz of the automobiles to a halt. The market, with long lock downs, may have a nightmare to face. Education, healthcare, business, industry, sports and entertainment, elections, news, everything seems to meander through different channels to the same overarching source—COVID19. We are sure that humans will win over this epidemic completely, but its traces will last longer than the epidemic does.
Economic activities moves in a vicious circle as consumption is one of the most important economic activities which is worst affected by this and it ultimately affect production and distribution too. hence, the cycle of generation of national income stopped. It is for this reason that an economic package for the economy emerging out of the lockdown requires stimulus enhancing demand across the economy. The best way to have done this would be given the direct benefit to people and business but irrespective of this the current government’s economic package lacks in this regard and they used current economic crisis as an opportunity to make India self–reliant even tries to bring structural economic reforms in the system. No doubt that these measures are real structural reforms which India needs since a long time.
In the current economic crisis India needs to push the demand immediately for which policy makers have been to spend on infrastructure. Infrastructure spending uniquely creates structures that raise productivity and extends spending power to the section of the population most affected by the lockdown.
Now the most important question arises that from where the money comes to the government for tackling down this problem as already the fiscal deficit is high from the budgeted number that 2.7 percent as revenues of government cannot be raised by increasing taxes as businesses are already badly hit by the disruption. Taxing the salaried class will further drain consumer’s purchasing power.
Even if the government shed the fiscal conservatism means as government earlier fixed the limit of 2.7 % of fiscal deficit, money will be tight because of loss of revenue due to fall in economic activity. Just distributing a small amount of money to a larger number of people will also not stimulate the economy, than from where will the money come from an important question arises as revenues of government cannot be raised by increasing taxes as businesses are already badly hit by the disruption. Taxing the salaried class will further drain consumer’s purchasing power. Hence, it calls for a large increase in government borrowings including substantial amounts from the RBI at a lower market interest rates what we need is a massive fiscal response built around direct state spending.
This is the high time when nations around the world must realize the directions of investments instead of investing in defense the hard earned money of tax payers. it should be utilized by public authorities in infrastructure development though it not only fulfilled the long pending demand of society but on the other side stimulate the consumption expenditure or even bring the equity perspective as general public also get benefitted. It increases the supply of essentials which eventually, resulted in low inflation rates.
COVID-19 has been pushing the whole world to new extremes ever since its still mysterious appearance in China. Its highly contagious nature has forced almost 80% of the world's population explore new survival strategies. The WHO and national governments have advised the people to shut themselves in to evade infection and a consequent threat to life. Although people of Europe and America initially did not pay any heed to the warnings and advisories and kept the business of life going as usual, the world seems to have acknowledged, lately, the enormity and gravity of the situation. People have come to embrace the ethics of solitude, social distancing, and quarantine as a necessity and social responsibility, bringing the hustle and bustle, clanking of the machines and whizz of the automobiles to a halt. The market, with long lock downs, may have a nightmare to face. Education, healthcare, business, industry, sports and entertainment, elections, news, everything seems to meander through different channels to the same overarching source—COVID19. We are sure that humans will win over this epidemic completely, but its traces will last longer than the epidemic does.
