COVID 19: The Economic Impact and what the Government needs to do!

A tiny little Virus, the dreaded COVID 19 has brought mankind to its knees and the entire world is either already in lockdown or is going into lockdown soon

Thousands already dead, more than 385,000 cases and billions affected directly or indirectly worldwide. It is one of the biggest epidemic the planet has ever seen affecting more than 195 countries currently (https://www.worldometers.info/coronavirus/countries-where-coronavirus-has-spread/).

The entire world is taking steps to save their citizens and I pray hope and wish that this passes over soon enough without causing as much damage as some experts are predicting. The governments are taking extreme, unprecedented steps to control the spread of this pandemic as there is still no treatment available and the only way to control is through social distancing.

China and a lot of other countries in southeast Asia have been practically under lockdown for almost 3 months as this started to spread in December 2019 and today it has reached gigantic proportions across the globe.

The healthcare workers across the globe are putting their best efforts to treat the affected people and I salute, applaud and bow down to the efforts of every such healthcare worker across the Globe.

India has also woken up to the grim reality and as of today most of the country has been put under lockdown and the entire Economy has come to grinding halt.

Indian economy is already undergoing the worst slow down history of independent India with unemployment reaching its worst levels in in 45 years and even FMCG companies registering de-growth for the first time in decades indicates a complete meltdown in consumer spending and consumer confidence.

Nobody fathomed that in a country of 1.4 billion people, consumer spending even on low value FMCG products shall go down.

The biggest examples, which are clearly indicative of the slow down comes from the fact that even Rs. 5.00 Parle G Biscuit( the world's largest selling biscuit) sales are struggling to a point where, one of their manufacturing facilities has been shutdown. The other indicative example in another category, Shampoo sachets costing Rs. 2.00 has also seen slowdown in sales, which indicates sharp decline in rural consumption.

Adding to this slowdown, will now be the impact of the Economic Lockdown due to the COVID19 virus.

It started with the impact on the Aviation Industry as well as the Travel & Tourism Industry but now it has spread to a point, where it will and is impacting every possible economic sector and every possible individual in the country.

As the entire manufacturing and non-essential service Industries come to a halt, the entire economy is in a TaleSpin.

The daily wager on the street, the auto / taxi drivers, small businesses, retailers, manufacturing industries in the MSME sector would be the worst hit and be unable to survive this impact unless otherwise the government it really comprehensively supports all these sectors and strata's of the economy.

Leading up to this pandemic, the government had yet to come to terms with the reality of the economic slowdown in the country and it was seen that they were not even ready to fully acknowledge the magnitude of the problem and my first hope is that they do not do the same, while assessing the further impact of this pandemic on the Economy.

The government now has a much bigger crisis at its hands, as the consumption was already at an all-time low before we got hit with COVID 19 and now both manufacturing and services sector will be severely impacted and will need a comprehensive stimulus to come out of the present crisis and stand on its two feet.

On one side it needs to put money in the hands of people who will spend it now, on the other hand it will need to support the industry to keep up the supply and employment.

Some of the ideas that the government and its Economic task force on COVID 19 should consider (some are at the level of the centre, others are state subject):

1. Direct Transfers to daily wagers and other unorganised labour force in the country.

2.Deferment of all loan payments/EMI's by 6 months.

3. Deferment if not waiver of all interest payments on all Loans by 6 months.

4. Reduction on interest costs. At least 3% additional subvention for a period of 6 months.

5. Restructure all Loans wherever Businesses/Individuals so desire.

6. Additional 20% Working Capital for all business having limits with Banks on the same collaterals to help the cash flow mismatch. Even private banks should be given such directives. All other clauses should also be relaxed, so that businesses can really derive benefit.

7. Waiver on fixed charges on Electricity (State subject).

8. Extension in paying Electricity Bill payments by at least 30 days after we re-open for business (State Subject).

9. Waiver on all Government levies and taxes which are a fixed cost for the period of the lockdown. E.g. Property tax, Maintenance Charges etc.

10. Specific stimulus package for all the Industries more severely impacted due to this pandemic:

- MSME Industry

- Exporters

- Aviation Industry

- Travel & Tourism Industry

- Hospitality Industry

- Retail Industry

This stimulus package should be designed in coordination with the Industry Associations, Chambers of Commerce, Trade Bodies, EPC's etc. A package which is comprehensive and adds values to the industry and in turn to the country in the long run. A half-hearted effort, will go completely waste, the funds will go down the drain and not benefit anyone and hence this should be done strategically.

11. Government needs to come up with a plan to re-imburse / compensate the fixed costs like Salaries & Wages etc which will be a burden on all MSME's.

12. Re-define the classification of NPA's/SMA etc during this torrid time.

13. Extend Financial Year 2019-20 by at least a month or more.

14. Extension on filing of all returns with no penalty or interest.

15. Clearing all refunds stuck with government departments such as VAT, GST, IT etc.

16. All due/undue payments of the government sector owed to the private sector to be immediately released.

There could be much more that the government might need to do and further and deeper thought as well as engagement will be needed with various stakeholders of the industry. However, all this needs to happen now as the need for this stimulus will be immediate and the government cannot afford to waste even a single minute in formulating the plan and its execution.

The worry of a looming Fiscal Deficit should be forgotten during the time of this emergency and the Economy which is a sum total of every small and big business entity in the country, which must be adequately supported as most of them are already reeling badly at the back of a massive slowdown and a crippling financial system leading to massive liquidity crunch further effecting them.

Please add your suggestions, ideas, opinions in the comment box and hope that the government takes quick massive action to safeguard the interests of our people, our industry and our economy.

Stay safe, Stay Home!!!

Let us fight this together and see it to the end…..