Financial Implications of the Corona Virus

With the advent of the Corona virus (christened COVID-19 by the WHO) pandemic, Governments all over the world have imposed lockdowns various durations depending on the severity of the onslaught in their respective areas. The net result has been a slowing down of the world economy, loss of jobs and in certain cases, total wipe-out of small businesses in all corners of the world.

To offset of the effects of COVID-19, almost all governments have allocated finances to stabilize their economies and re- start growth. These measures are showing results and are succeeding in the intended outcomes. But, as the crisis gets prolonged, the questions that are arising are: Has the money been directed correctly? Is the allocation sufficient? It is estimated that a total of $13 trillion may have been allocated worldwide. Some researchers are estimating that the deficits may climb up to $30 trillion by 2023. To bring about a sustained prosperity, Governments and the Private sector must work hand-in-hand to overcome the disastrous after-effects of the economic slow-down due to this pandemic.

As far as India is concerned, it was already in an economic slow- down even before the pandemic had started. The pandemic has further deteriorated this slow-down to the extent that experts have predicted a growth rate of 3.1% for the financial year 20-21. The World Bank and other rating Agencies have already downgraded India’s growth rate for 20-21. It is feared that India may be tending towards a deep recession and the lowest growth rate since the economic liberalization in the 90s. It could also be the worst contraction since Independence in 1947.

Unemployment

The unemployment figures have risen from 6.7% to 27% till April, 2020. Salaries have  been reduced by many companies and households have experienced a drop in incomes as compared to the previous financial year. The sales of many commodities and consumer goods went down drastically hitting the manufacturing sector. Supply chains of many goods were disrupted leading to shortage of raw materials. Farmers engaged in growing perishables were hit because there was no transport available to carry them to the markets and no customers.

The unskilled labour working in the unorganized sector were hit the hardest with no jobs and no place to stay. There was mass migration which created a problem of huge proportions. The state and central governments took steps to solve the problem, albeit a little late.

Many companies in the large scale sector reduced their outputs temporarily. Startups were affected due shortage of funds and they had to resort to layoffs of their employees. FMCG companies also had to reduce their outputs and concentrated on only essential items. Stock markets also plummeted and recorded their lowest indices in the last so many years.

Relief Measures

The Government of India has announced a number of steps to tackle the economic situation. The deadline for filing Tax returns for both personal and corporate incomes has been extended till the end of the year 2020. Funds have been allocated to take care of food security, MSMEs, healthcare and other vulnerable sections of society. GST dues of states have been released to augment their treasuries. A number of relief measures for the poor amounting to Rs 17,000 crores were announced. The RBI announced measures to increase the liquidity with the banks to the tune of Rs374,000 crores. These measures were lauded by the various prominent agencies like the IMF, World Bank, etc. as steps in the right direction. A step was taken to reduce unnecessary expenditures in various  Government Departments. NBA accredited college, IIMT Group of Colleges, Greater Noida also helping poor and needy in this pandemic situation.

A month back, the prime minister, Shri Narendra Modi announced a package of Rs.20 Lakh crores to bring back the economy on its feet. Subsequently, the break-up of the money was disclosed. This included free food grains to the poor for a limited period of time.

The Government is hopeful that the actions taken would bring substantial results at the ground level and the economy will slowly return to normal by the end of FY 20-21. This is a very optimistic outlook.

We, at IIMT College of Polytechnic, one of the best polytechnic colleges in UP, offer a wide variety of career options to students who have completed their Higher Secondary. We train and nurture them such that they widen their canvas to be gainfully employed and become useful citizens of India.