April , 2020
17:23 pm

Dr. H. P. Kanoria

Global economy is hit by the coronavirus (Covid-19). It is taking its toll on the economy. Even world wars had not affected as many countries as coronavirus has done. Businesses, industries and service sectors have come to almost a grinding a halt. People engaged in emergency services like healthcare, law & order enforcement, etc. are indispensable. Healthcare professionals are exposed to risk of coronavirus more than anyone else. Covid-19 will have magnifying impact on the finance and debt leading to a financial crisis worldwide. Global markets are in turmoil. People are confined to houses. All establishments are almost closed. People have been advised to work from home. Global economy is likely to go into a recession. Bankruptcies are likely to mount.


Many countries have already announced financial relief packages. To combat the spike in unemployment, the Austrian government unveiled a new form of “Kurzarbeit“, whereby the state will pay 80-90% of employees’ salaries provide balance is paid by employer as well as social security no matter how few hours they work. Massive support measures have been unveiled for the economy, totalling €38 billion. This amounts to 10% of Austria’s GDP, a stimulus unprecedented in peace time. The US, the UK and the EU have all released stimulus packages. The US and UK are expected to release USD 1 trillion and USD 400 million in aid to small businesses. South Korea was the first country outside China to experience large scale epidemic. It has fought with Covid-19 by broad-based testing and mitigation strategies backed by great healthcare.


In India, Prime Minister Narendra Modi announced a 12-hour ‘Janata Curfew’ on 22nd March. Thereafter, on 24th March Prime Minister announced almost full lockdown. PM has appealed to everyone to stay indoors and go out of the house only when it is absolutely essential. Avoid the mindset that it will not affect India.The PM has also announced the setting up of a Covid-19 Economic Response Task Force to be headed by the Finance Minister Nirmala Sitharaman. It is hoped that the task force will not only announce the financial relief for all the sectors and people of all sections, but get the same implemented.


In India, an estimated 90% of the total 47 crore work force are not entitled to get any sort of compensation in case they are laid off for Covid-19 pandemic. Unlike retrenchment, lay-offs are temporary suspensions. Self-employed persons will be affected severely.


Tourism, MSMEs and aviation have been badly hit. The RBI may consider for temporary forbearance on non-performing assets (NPAs) for troubled sectors and companies, which will have force/liquidity crunch. Reducing interest rates and giving moratorium for six months/a year will help. Other helpful measures can be tax cut for 2020-21, settlement of tax disputes, speedy tax refunds and allowing appeal without deposit’s part of tax levied in the assessment. Capital gain tax and MAT tax needs to be withdrawn. The other immediate doable measure is to release all the pending payments from government agencies, both central and state.


Fitch has reduced India's growth rate to 2% for FY2021. Moody’s has also reduced India’s GDP growth forecast to 2.5% in 2020. Global GDP is forecast at 1.3% from 2.5%. Standard & Poor’s has also slashed India’s growth to 3.5% from 5.7% for 2020 and China's growth is cut to 2.9% from 4.8% to 2020. India is having a reserve of foreign exchange of around USD 480 billion. Oil prices have been falling. The Sensex has fallen 15000 points. Indian Rupee dropped to Rs. 77 against a dollar, and thereafter has been trading around Rs. 76. Several companies like Sun Pharma, Emami, Supreme Petrochem and Thomas Cook have announced for buyback. The foreign institutional investors have been selling equity and bonds too.


India Inc. has sought fiscal stimulus of around 1% of GDP or Rs. 2 lakh crore. Fiscal stimulus can be used to transfer Rs. 5000 to people whose annual earnings are less than Rs. 5 lakhs benefitting 40 crore people and MSMEs. GST payments should be on collection of bills rather than on raising bills. NPA classification should be revised to match the actual reality of the market and not idealism and populism.


Cover Story: Climate Change is a global challenge. Increased anthropogenic activities such as industrialisation, urbanisation, deforestation, changing land-use pattern in agriculture, exploding resource uses, increasing consumption of electricity and water, heaps of garbage emitting poisonous gases, mindless dumping of wastage in rivers and oceans have all been greatly contributing to global warming.


It affects the biological, the physical systems of human beings and all living beings. It causes glacial regression and snow melting resulting in rise in sea level and extreme natural phenomenon like floods, droughts, lower agricultural production, diseases, decreased productivity, etc.


At the 2015 Paris Conference, the world pledged to work to limit temperature rise to 2 degree C, a step that will require a radical reduction in the use of natural resources and to change in life patterns.


A research study by the Indian Agricultural Research Institute (IARI) found that increases in temperature (by about 2 degree C) would reduce potential grain yields in most places.


Between 2030 and 2050, climate change is expected to cause approximately 250,000 additional deaths per year, from malnutrition, malaria, diarrhoea and heart stress, according toWorld Health Organization (WHO).


Global sea levels have been rising as a consequence of thermal expansion and ice melting. Sea levels rose on an average by 3.1% due to climate change. The emperor penguin population is declining fast. It may face extinction by the end of this century.


Globally people, leaders and authorities need to take various measures urgently. Some of these are:

Wise use/consumption of natural resources and reduce consumerism.

Improve forecasting and early warning systems.

Establish disaster and vulnerability mapping.

Augment public awareness.

Creating community-based forest management and afforestation.

Improve irrigation and flood management.

Harvest rainwater.

Recycle used water.

Preserve water sources and water bodies.

Plant trees everywhere, especially on the banks of rivers to stop soil erosion.

Remove and recycle garbage, especially those that would otherwise emit methane gas injurious to health. This will create new employment in urban, semi-urban, rural areas.

Use insoluble materials only on restricted items, not in general like for food, vegetables, flower bouquets, etc.

Recycle insoluble materials – each municipal corporation and panchayat should manage recycling of garbage and fertilising plants.

Ban the use of coal by hawkers on streets.


India is to cut its import bills. Weak growth and financial sector risks have to be dealt with positively, without delay. To achieve our goal of USD 5 trillion economy by 2024-25, we have to forget ideology and populism. We have to act fast. Many countries have excelled in fast implementation of their development and infrastructure projects. We have to learn from them. Regulatory forbearance, liquidity flows by doing away with fear at both ends of lenders and loan takers, tax holidays, removal of MAT, review of all tax assessments if requested by assesses, etc. are some of the steps which can equip India Inc. to cope with this crisis. India has plenty of resources, which others do not have. Cost of funds need to be reduced. PSU banks have not been lending. After the Yes Bank fiasco, private bankers will also be shaky to lend. Amalgamation of banks will also restrain credit flow as power to lend will be concentrated. Bank’s officials are trapped in serious investigation in case of a failure of business. Punishment should be after judicial verdict instead of custody in CBI or judicial. 


To conclude, for realizing PM's vision of becoming a USD 5 trillion economy, we need the following in order to cope with the disruption caused by COVID -19 : 

allowing banks and FIs to g for a one-time restructuring of loans which have / will go bad because of the lockdown, relaxation of existing norms, immediate infusion of liquidity into the system, speedy tax refunds both IT & GST, disposal of arbitration awards availing adequate liquidity to NBFCs, immediate payments of outstanding by PSUs and government departments. RBI should ensure that banks do not pressurize NBFCs to recover debts and allow them to use the newly lent funds to be on-lent for fresh economic activities, and not fresh settling previous dues. Also, Sec 29A of IBC needs to be removed so that promoters wh have been victims of circumstances (and who are not frauds) can bid for their own distressed firms during the resolution process.  


We, Bharatwasi, call the Earth our Mother. It is our duty and obligation to protect Mother Earth and to take good care of Her. The current pandemic is also largely the result of mankind’s immense neglect of Mother Nature. We, Bharatwasi, must join hands with our brothers and sisters across the world to take a pledge to be more responsible to the planet we inhabit.

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