IS THE CURRENT GOVERNMENT APT FOR MANAGING RESOURCES DURING COVID-19: AN ANALYSIS

By- Anshit Minocha and Anjumar Dewarshi

Introduction

There can be economy only where there is efficiency.” quoted by a Benjamin Disraeli stands undoubtedly and unquestionably true. Economic conditions represent the contemporaneous state of the economy of a definite country, region, or boundary.

Economic conditions are indicated with fluctuations or changes in them which are supplementary and which happen as changes in time occur. The economy forbearances and acquaintances transition in its business cycles as the economy experiences contraction and expansion.

Economic conditions are contemplated to be positive when it senses expansion and negative when it experiences contraction.

They are determined by handful macroeconomics factors which process for the country as a whole and microeconomics factors too which process for individuals, supported illustrations would be monetary and fiscal policy, the character of the universal economy, the rate of unemployment, productivity, rates of inflation and prices hikes, etc.

Testimony related to Economic conditions is discharged on a bona fide and regular basis, customarily weekly and even quarterly. A profusion of economic indicators for example Unemployment Rate and Gross Domestic Product Growth Rate are frequently used to describe the category of Economic Conditions.

Narendra Modi has been affirmed as the National Hon’ble Prime Minister in the year 2019 by the acquisition of majority seats in the Parliament and thus leading to the fruitful and commendable start of his second term of the same.

The COVID-19 crisis forthwith other nations had reached and attacked India, the same left the Hon’ble Prime Minister Narendra Modi to declare and announce nation-wide lockdown with rigorous rules of enforcement and the whole economy leading to a shut-down with only the fabrication and manufacturing of essential commodities advancing.

The government will be desiring some potential techniques to pull the dying economy out of the morass because the economy was characterized by not more than 6 percent GDP in the first quarter of FY20 which has been the slightest ever recorded in 6 years term of Narendra Modi- BJP formed government and also the automobile sector has been languishing in unemployment which evidences that fibrous times are about to be experienced by the overall economy.

Economy’s Scenario Pre COVID-Era

The Economy is not operating well under Modi-NDA led government’s second term. There has been a dominant slowdown in the major and influencing economic indicators and this slow-down was this lowest last recorded in the era of the 1990s. The percentage of Real GDP is as crouched as 4.5% which is the nethermost in the antecedent 5 years.

The fabrication of industrial goods is comprehensively depressed, the recorded production of investment goods is renouncing, and reiterating the previous point, have been worst recorded in the last 5 years.

These reducing recorded numbers are for a humongous materializing market economy which had been reportedly fructifying in the previous 5 years.  One of the dazzling spots situated in the economy is the equity market which is rejuvenating to new skies, but the recorded rise will not be endless if the economy of the country continues to stagger, the mentioned firms are the part of the economy and their shares will ultimately follow the economy’s footstep.

The Indian Economy is continuously degrading and not accelerating, the country’s two extensive drivers which are exports and investments have miserably put to a slow-down following the Global Financial Crisis also known as GFC.

In the year of 2016, Our Hon’ble Prime Minister Narendra Modi stunned and alarmed the whole nation by demonetizing 86 percent of the currency in apportionment with the settled and declared desideratum of affray black money and corruption. The move has deplorably led to criticism of the BJP- Modi led and formed government and also has enriched in a greater amount to economic rat’s nest.

The barnstormed goal of reforming the trade sector by the Make in India movement, the central government has become for the first time following in decenniums to accretion in the tariffs on imports, puncturing India’s economy and conceivable chance to assimilate into global supply chains.

India has remained under deliberation over the Regional Comprehensive Economic Partnership which was a regional trade agreement entered into with China and other large-scale Asian constituents and when the following examination was concluded, Piyush Goyal (Minister of Commerce India), gestured that India would be reuniting with China in the same agreement.[1]

The Hon’ble Prime Minister has enunciated “Ease of living” as the primary intention and objective and also have advertised how the government has used telecommunications to combat and eliminate corruption in India’s beadledom and management.

The government is captivated and dominated by its ease of doing business placings and rankings but is reluctant to explicitly accouterment with the accentuation in the financial sector which is the need of the hour to ensure activation of growth in the investment sector.

The parameter of India’s GDP statistics came into catechism when GDP growth in FY17 was overhauled to 8.2% which has been the highest between FY12 and FY19 in defiance of demonetization.

The following cited data shows the growth of 11 out of a total of 15 economic indicators was more desirable during the second term of Manmohan Singh- UPA formed government, more appropriate and more valuable analogously than the Modi-NDA formed government. [2]

Economy’s Situation Post-COVID-Era

It is righteously said, “The economy is one of the most important pillars of the country, the whole development is dependent on the economy of the country”. From the time when COVID 19 arrived and to protect the country from this epidemic situation, our Hon’ble Prime Minister has put the country under complete lockdown and this lockdown has a great shock on our economy, the GDP has fallen from 5.1% to 4.8% as per the current statistics. As per the data, RBI has stated that the new rating will be of a 3% growth in the GDP of the country.

According to the NSO report, India’s GDP will be at 4% in the year 2020 which will be the minimum in 11 years, and due to crises abound since 2016, demonetization, GST glitches and, credit crisis have taken a toll, weak demand job drought and muted wages have dented consumer sentiments & demand, blighted job market Unemployment at a historic high amid few new jobs and many layoffs[3]. Thereafter COVID-19 these all will be on the verge of increasing and will have a viral brunt on our economy. 

75% of India’s workforce is either self-employed or casual workers. They would also be catastrophically affected, layoff season from airlines to hotels, firms declaring salary carves, MSME Rout majority of which are small little cushion are already bruising from ban and GST, only a fraction may ride out and recover, credit crisis delinquently and NPAs could rise as individuals & enterprises likewise encounter and endeavor errors while making payments.

The major impact that is visible is on the Share Market, the first two arcs of coronavirus outbreak have already wiped off more than Rs 50 lakh core worth of equity investor wealth, with benchmarks Sensex and Nifty languishing at multi-year lows after falling 35 % percent from their January peaks.

The third-round effect is likely to be materialized, as the economy,i.e. corporates encounter a hit on bottom lines. The weaker firms are likely and expected to pay cuts or retrenchment, in turn; it is expected to create a vicious cycle of lower corporate Capex and weaker consumer demand.

Small sectors are padlocked and bankrupt, management and manufacturing of automobiles companies are interrupted, recycling of the product of e-waste product is stopped, the Thermal Power sector is distressed, constructions are interrupted[4].

India’s giant IT services companies are likely to face a significant slowdown in growth during this financial stretch of the year as they grapple with the upheaval wrought by the Covid-19 pandemic.

Top software exporters – Tata Consultancy Services, Infosys NSE 1.78 %, and HCL Technologies NSE -0.10 % — are expected to be jolted by the curtailing technology spending by clients in the US and Europe following lockdowns across the globe, experts said.

TV series and Bollywood sector which have had great addition and beneficence towards GDP now belief interrupted as well because there is no dispatch of any new films or daily TV series, the government will likely be not able to collect any sort of taxes. Even the agricultural sector is concerned, the supply of goods and crops have also been stranded and affected.

Due to unemployment people have canceled the acquisition and investment of non-essentials, transportation has also been struck down due to which a rise in petroleum and gas products has been recorded.

The cash draught can be seen as the government is not getting abundance and adequate money to pay the reimburse the salary of the government officers the rationale being the amount of cash flow in the country is limited and distressed.

Measures taken to battle COVID-19

Various steps indeed have been appropriated by the government to contain and discipline the economy of the country. A“COVID-19 FINANCIAL TASK FORCE” has been formed under the administration of the Finance Minister to conquer and defeat the crisis caused by the economy due to the virus. 

The finance minister stated that expenditure incurred on overcoming the corona epidemic will suffice under the purview of CSR. 1.7 lakh packages have been introduced by the government for the RBI.[5]

Krishnamurthy Subramaniam, Chief Economic Advisor has stated that the government and RBI have indeed taken several initiatives to benefit the clamor of the industry.

There is an obligation to sustain liquidity at surplus levels and provide special liquidity support for any companies/ NBFCs/ banks that come under strain due to intensifying risk aversion in financial markets or due to large demand shock, with the corporate bond and commercial paper markets are facing liquidity challenges the RBI should intervene, either directly or through the commercial banking system, to ensure adequate and adapted flow of funds into the market.

The government should not curtail its capital expenditure plans despite any shortfall in the tax collection, insolvency, and bankruptcy code should be suspended like aviation and hotel, that stance severely impacted due to COVID-19. As per the guidelines of RBI, Honourable Prime Minister Narendra Modi declared Rs 20 lakh core economic packages to rejuvenate the economy. 

The government has taken infrequent measures to provide timely benefits to the farmers of the country. The NDA- the government has already reassigned Rs 17,986 crore to farmers since March 24 under the PM-Kissan scheme.

The RBI depressed the reverse repo rate by 25 basis points to 3.75 percent, thus discouraging banks from keeping their surplus funds with it.

It ensured liquidity for small non-banking financial companies (NBFCs) and asked banks to lend at least half the money earmarked to be borrowed from the liquidity window to them.[6]

Monetary Policy Committee (MPC) has been disclosed and divulged, declaring another pause in repo rate cuts but kept its stance accommodative. It has provided relief to loans for the auto sector, real estate micro, small and medium enterprises (MSMEs), and long-term repo rates like at the European Central Bank (ECB).

But with surging headline Consumer Price Index (CPI) inflation has been contrived to halt on the repo rate, RBI monetary panel finalizes steps to save the economy from coronavirus, Rs 1.7 lakh crore spending plan has been announced to curb the impact of the virus outbreak.[7]

The aggregate of the production and manufacturing of heavy machinery and automobiles should not be ceased, buyers shall buy Indian products and promote “Make in India, India should start its factories and company to build home-made products to safeguard that there are no needs of concentrating money on transportation

An instance supporting the argument would be, India used to import SWABS at Rs. 17 from china government but in a raw development, Indian government initiated by interconnecting to the greatest and humongous Indian polyester manufacturer to locally design SWAB, the “Make in India” movement was promoted by getting aware of the design & material which was approved from NIV & manufacturing orders were given to MSMEs.

In Today’s Era, India is manufacturing at these Rs.2 which is a commendable improvement.

Conclusion

Even though the advancement which was made during the initial years and current years of the Narendra Modi- NDA formed government was not acceptable and satisfactory to shoot up the GDP and ensure the economy is at its peak. But, as per the current situation, the economy is expected to take numerous years to revive to its original and initial stages.

With an ample number of the opportunity of jobs in almost every sector; Moreover, there are numerous companies which have determined and nailed to settle in India and inaugurate it in a similar way like the Pharma sector, the Iron sector, Machinery, Vehicles, Etc are expected to get manufactured in India and henceforth promoting the “Make In India” Movement.

India is expected to soon have numerous and oodles of job and employment which will ensure a balance along with a flow of cash in India, even government treasury fund is expected to recover gradually and initially to stable stages. It is ensured in the best confidence that the government is taking applicable, convenient, and correct measures to tackle the pandemic of COVID-19 in positive and productive ways.


[1]Shezad Lakhani,How the Modi Administration Is Hamstringing the Indian Economy, THE DIPLOMAT(Jan 10, 2020), https://thediplomat.com/2020/01/how-the-modi-administration-is-hamstringing-the-indian-economy/

[2]Vivek Kaul, Manmohan Singh vs Narendra Modi: The real India growth story, Live Mint( Apr. 12, 2020, 8:29 AM), https://www.livemint.com/politics/policy/manmohan-singh-vs-narendra-modi-the-real-india-gdp-growth-story-1555034270688.html

[3]India Brand Equity Foundation, About Indian Economy Growth Rate and Statistics, Ministry of Commerce & Industry (Aug. 19, 2020), https://www.ibef.org/economy.aspx

[4]Pratim Ranjan Bose, Thermal power sector faces bleak scenario post-Covid Situation, Hindustan Business Line (Apr. 13, 2020), https://www.thehindubusinessline.com/economy/thermal-power-sector-faces-bleak-scenario-post-covid-situation/article31330730.ece

[5]Siddhartha Singh, RBI Monetary panel finalises steps to save economy from coronavirus, Economic Times (Mar. 27, 2020, 9:40 AM), https://economictimes.indiatimes.com/news/economy/policy/rbi-monetary-panel-finalises-steps-to-save-economy-from-coronavirus/articleshow/74839754.cms

[6]Anup Roy, COVID-19: In fight against economic slowdown RBI introduces new measures, Business Standard (Apr. 18, 2018, 1:26 PM), https://www.business-standard.com/article/economy-policy/rbi-introduces-measures-to-fight-covid-19-slowdown-cuts-repo-rate-to-3-75-120041700485_1.html

[7]Ajay Chhibber, RBI does its bit the ball is back in govt’s court to revive growth, Economic Times (Feb.07, 2020, 6:11 AM), https://economictimes.indiatimes.com/news/economy/policy/view-rbi-does-its-bit-the-ball-is-back-in-govts-court-to-revive-growth/articleshow/73992084.cms

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