Coronavirus disease is a highly Infectious disease caused by a virus. It is a new strain of coronavirus that had not been previously identified in humans caused by Covid-19. It was practically unknown before the outbreak began in Wuhan, China, in December 2019. Covid-19 is a large family of viruses that are known to cause illnesses ranging from common cold to more severe disease such as Middle East Respiratory Syndrome (MERS) and Severe Acute Respiratory Syndrome (SARS). It has been labelled a pandemic by the World Health Organization (WHO). Covid-19 was earlier known as 2019 novel coronavirus.
The Ministry of Health and Family Welfare, Government of India, has come out with a detailed questions and answers on the virus for reducing the doubts in the minds of the public. It writes that people can catch it easily from others who are infected. The disease can spread from person to person through small droplets from the nose or mouth which are spread when a person with covid-19 cough or exhales. The virus cannot be e transmitted through skin.
To prevent the spread of the virus and to make the public more aware, PM Shri Narendra Modi addressed the nation on March 19th 2020, where he announced one-day ‘Janata curfew’ on 22nd March 2020. He again addressed on March 24th, where he announced a 21-day complete lockdown beginning on March 25 to fight the covid-19 outbreak. He addressed in his own style and said ‘Jaan hai to jahan hai’ (Life is more important than livelihood).
However, the 21-days lockdown was not enough to control the spread of the virus. there was a feel among the CMs of a number of states about the extension of lockdown period. In this backdrop PM consulted with Chief Ministers of different states and again came on national television and announced an extension of nationwide lockdown till 3rd May 2020 to break the chain of spread of corona virus.
The global economy is witnessing the worst recession since the Great Depression in the 1930. The experts are expecting that the global economy could shrink by up to 1% in 2020 due to the Coronavirus pandemic. Earlier, the world economy had contacted by 1.7% during the global financial crisis in 2009. About 67% population of the world in developing countries is going to face unprecedented economic damage. As per UNCTAD, commodity-rich exporting countries will face a $ 2-3 trillion drop in Investments from overseas 2022.
This continuously growing Covid-19 pandemic has cast a long shadow on the society and economy. The current crisis is an alarming signal for India. World Bank expects India will grow 1.5% to 2.8% while IMF has projected GDP growth of 1.9% it during the current fiscal due to covid-19 pandemic and consequent lockdowns. All International Institutions such as – IMF, World Bank, WHO is deploying all its resources in this fight especially, supporting the developing countries.
The first 21 days and second 19 days lockdown of an immediate basis has created problem of movement of more than 14 crore labourers in India. They want to reach their villages as soon as possible and crossing state borders across the country. They are living in the shadow of hunger. This is a very tough situation for them as well as for the government as the coronavirus pandemic is still on the move. the government has directed local authorities to arrange food, accommodation and sanitation for migrant labourers.
To provide relief to the most vulnerable sections of the society, finance minister Ms Nirmala Sitharaman had announced a Rs 1.7 lakh crore relief package on 26th March 2020 within 36 hours of the lockdown. The relief package was around 0.8% of GDP. However, it was much smaller than that of most of the other G20 nations. Pradhan Mantri Garib Kalyan package was a step in the right direction. The aim of the package was providing a safety net to those hit the hardest by the covid-19 lockdown. The package includes insurance cover to frontline medical personnel, cash transfer, free food and LPG distribution and social security measures for affected workers. About 800 million people will get free cereals and cooking gas apart from cash through direct transfer for 3 months. Under the package, the government announced to provide free 5 kg of wheat/rice and 1 kg of pulses every month for the next three months to the poorest of the poor. Moreover, 204 million women Jan Dhan account holders would get Rs 500 per month for the next three months. MANREGA wages increased to Rs 202 a day from Rs 182. It will likely to benefit 136.2 million families of the country.
The government is also ready for a second stimulus package for those words affected by the covid-19 related nationwide lockdown. The government is going to announce a series of stimulus package to revive the economy. The physical condition of both centre and state is a matter of concern. The architect of FRBM act Mr Yashwant Sinha has already suggested in an article, the government not to worry about the FRBM act, to go ahead and spend the money for the welfare state. The government is also planning to introduce relaxation in the FRBM Act.
The RBI is also working in this direction. The RBI is continually monitoring the situation closely. It is making all the efforts to keep the financial sector moving smoothly. Till now, it has twice reduced the rate to boost the economy. The first scheme was mostly for PSUs and large corporations and second announcement was primarily conducted to help small and medium-sized financial organisations.
In the first tranche RBI announced targeted long-term repo operations (TLTRO 1.0) to boost liquidity in the market on March 27 2020. The objective of the policy was to – (a) Mitigate the negative effects of the virus; (b) To revive growth; and above all (c) preserve financial stability.
The RBI announced a 75 basis points cut in repo rate and 90 basis points cut in reverse repo rate to 4% as a measure to counter the economic slowdown caused by the Covid-19 pandemic. The policy rate was reduced by 75 basis points to 4.4%. The cash reserve ratio (CRR) of all banks was reduced by 100 basis points to 3.0%. The reduction in the CRR was expected to release primary liquidity of about Rs 1,37,000 crore. The commercial banks (including RRBs small finance banks and local area banks), co-operative banks, all-India Financial Institutions and NBFCs (including HFCs and MFIs) were permitted to allow a moratorium of three months on payment of instalments in respect of all term loans outstanding as on March 1, 2020.
The RBI announced a second tranche of TLTRO 2.0, for an initial amount of Rs 50,000 crore of liquidity to boost the economy on 17th April 2020. In this round RBI further cut 25 basis point, reverse repo taking it to 3.75% from 4% earlier. The move would help the banks to lend more. Now, banks have to lend money to consumers instead of landing it to the central bank. The repo rate remains unchanged at 4.4 %.
It has also provided special refinance facilities of an amount of Rs 50,000 crore to NBFCs – NABARD, SIDBI and NHB to enable them to meet credit needs. The surplus capital will help to refinance the commercial and Housing Finance banks to Infuse liquidity into the market. The Apex Bank of the country has also relaxed the asset classification norms. The present 90 days NPA norm will now not be applicable to the moratorium granted on existing loans by banks. The bank will not make any dividend payment to shareholders due to the ongoing financial challenges. The Liquidity Coverage Ratio (LCR) has been brought down to 80% from 100%. It would provide more liquid to banks.
Thus, we can say that even as the coronavirus continue to spread, the country is making all its efforts to alleviate its effect. The central government and all the state governments are working together to fight against this pandemic. All the opposition parties are also supporting the central government. We can say with the all the efforts – corona harega aur desh jeetega.
(Vinay K. Srivastava teaches Finance at ITS Ghaziabad. He recently published his next co-authored book – ‘Indirect Tax Reform in India: 1947 to GST and Beyond’. He may be reached at twitter @meetdrvinay)