Impact of covid -19
Firstly, this virus has created a profound Social Impact. All the affected Nations across the world have uniformly adopted the practice of Social Distancing. People are required to maintain a distance of more than one meter. This has created many emotional problems for several people. Televisions continuously telecast pictures of crying children who cannot go near their parents. Social Distancing has made travel very restrictive such that only one person can travel in motorbike, only two persons can travel in a car etc. All travels through Public Transport System by air, road, rail or water have been banned. Many have committed suicide due to social distancing and shut down.
Secondly, all the Governments of the world have enforced Shutdown or Lockdown. Some countries have enforced this rule ruthlessly including India by implementing section 144 of the Criminal Procedure Code 1973. Certain jokes were doing the rounds that Lions are let out on the streets in Russia so that people will remain inside their houses fearing attacks from Lions. In China several houses in the affected areas have been sealed so that people cannot come out. Several countries have reported many numbers of suicides including India. There were many who could not get their needs met because of shutdown. The healthcare sector is so focussed on treating corona infected persons that the persons affected by other kinds of illness are being turned away from hospitals. There are instances that some hospitals have sent away dialysis patients for want of beds and other needs.
Thirdly, the unemployment levels have started shooting through the roof and the unemployment rate is growing. According to one report, in India under the unorganised sector, nearly 44 crore people are daily wage earners and small roadside vendors including people having small eat outs, tea stalls etc.All these people have lost their jobs due to shut down. Several million employees in the organised sector such as Aviation, Tourism, Hospitality Industry, Auto and Retail Industries have also lost their jobs. Even major industries, apart from medium, small scale and export industries have shut down and laid off their employees contributing to escalation of unemployment levels. Many such people face the threat of starvation.
Fourthly, the economic impact has been unprecedented. COVID-19 has triggered an unusual recession in all affected countries including India. Indian overseas investments have also declined. The impact has risen from several sides. Due to shut down the demand side for goods and services has been severely dented. According to Asian Development Bank study the Personal Consumption losses in India would be about $29.9 Billion (Losses Due to Decline in Retail Trade). The supply side impact has also been profoundly negative. Even the permitted essential industries which are allowed to operate during shut down do not get their supply needs. The impact on financial markets is unbearable. The market cap loss on one day (12thMarch 2020) exceeded rupees 10 lakh crore due to sharp decline in the stock market indices. The International Trade has also been adversely impacted. According to the UNCTAD study, the decline in the global value chain due to reduced exports would be nearly $50 Billion. According to FICCI study, more than 70% of all businesses would be affected, nearly 80% of all businesses have reported reduced cash flow, more than 60% of supply chain affected, the Aviation Industry has suffered globally to the extent of $113 Billon due to passenger revenue loss and many Companies have been pushed to bankruptcy. Virgin Australia has already filed for Administration. The price of crude oil in the American market has fallen to negative level (Below Zero) though it is slowly recovering. The investments in India through Participatory Notes have fallen to the lowest level in fifteen years to rupees 48000 crores. The stock market indices are crashing down across the Globe including India. The Bombay Stock Exchange Index lost more than 12000 points. There is a fear of hostile takeovers as the share prices are crashing. In order to counter this trend, the Indian Government has amended the Foreign Investment Rules so as to make government approvals mandatory for certain types of investments. China has criticized this amendment as opposed to the World Trade Organization principles of non-discrimination and free and fair trade.
Fletch Solutions has estimated that the Gross Domestic Product of India for the year 2020-2021 would fall steeply to about 1.8% as against the estimate of 4.6%. World Bank has estimated that the GDP of India for the year 2020-2021 would be between 1.5 to 2.8%. OECD, Moody’s and S & P have also revised the GDP growth rate downwards. The estimate of the Central Government to raise about rupees 13.19 lakh crore through Vivad-se-Viswas Scheme under direct taxes during the year 2020-2021 is at great risk. The World Bank has estimated that the additional expenditure of the Central Government in India during the Lock Down period would be between rupees 7 to 8 lakh crores.
CENTRAL GOVERNMENT RESPONSE
The Central Government has initiated several measures to combat the impact of COVID-19. Though shut down is considered essential to deter the spread of the virus, Central Government has permitted operation in certain sectors like agriculture, veterinary services, manufacture of fertilizers, pesticides, seeds, movement of agriculture equipment, expansion of e-maundies to over 1000 etc. Many relief measures have been provided to the poor and needy. Central.
Government has already transferred $3.9 billion (rupees 27300 crore approximately) through direct cash transfer to more than 320 million people. Under the Pradhan Mantri Garib Kalyan Anna Yojana 5 kg of food to be provided free for 3 months through TPDS (through Ration Shops under State Governments). The distribution through the Prime Minister Kizan Yojana Scheme, farmers have been provided rupees 3000 per person, thus more than rupees one lakh crore has been paid. More than 20 crore Women Jan Dan account holders get rupees 500 per month for three months. Payment of ex-gratia of rupees 1000 to more than 3 crore poor senior citizens, poor widows and poor disabled people. In order to provide more cash to the middle-class people in India, the Central Government has processed more than 10.2 lakh Income Tax Refunds in one week to release about rupees 4250 crores. Reserve Bank of India has initiated several measures like reducing the Reverse Repo Rate, releasing more than rupees 1.2 lakh crore Foreign Currency into the system etc.The Central Government has also provided for reliefs in many other areas like education, compliance and financial sector. School children studying in classes from I to VIII standard are to be promoted to higher classes without examinations. Time line for filing all Tax Returns have been extended by three months up to June 2020. All EMI payments time line extended by three months. Landlords are not to insist on payment of rent during lock down period etc.
COVID-19 ECONOMY REVIVAL PACKAGE
Thus far, the Central Government of India has focused on formulating and implementing the Relief Package primarily targeting the citizens living Below Poverty Line including Daily wage earners, migratory workers and the like. It is learnt that the comprehensive Economy Revival Package is on the Drawing Board of the Government. It is also logical that any Revival Package can be operational only after the shut down/Lock down is lifted, which is expected after 17th of May 2020. Due to unexpected crisis in Franklin Temple-ton Mutual Fund, RBI announced an immediate bail out plan for high risk Debt Mutual Funds to the extent of rupees 50000 crore designated as SLF-MF (Special Liquidity Facility for Mutual Fund). RBI has already infused rupees 3.74 lac crores through downward revision of the Reverse Rep Rates.FICCI has suggested to the Government to crate Bharat Self Sufficiency Fund with a corpus of rupees two lac crores to spur revival of the company and avoid dependence on imports and help local companies CII and FICCI have opined that any Revival Package to be announced by the Government should be at least between 2 to 5% of the GDP. which would work out to rupees 4 to 5 lac crores. FICCI has emphasized that the primary focus should be to enhance cash flow in companies to meet their working capital requirements by giving loans with interest subsidy along with back up Insurance for Banks.It is expected that after the shut down/lock down is lifted at least partially, the Government of India will announce a Comprehensive Economy Revival Package. The Honorable Prime Minister of India, in a Nation wide televised speech on 12th May 2020, has mentioned that his government has prepared a package for the revival and growth of the Indian Economy to the extent of ` 20 lac crore, the details of which will be announced later.
LESSONS LEARNT FOR FUTURE
Bill Gates has been vehemently stressing the argument that governments of Nations spend enormous amounts of money on Defence but very little on Research and Development in the field of medical science, especially in the field of development of vaccines against viruses. The Governments need to focus more on such research and healthcare for its citizens considering the fact that the loss and damage to citizens and the economy are greater than a world war. Another important area is regarding development of effective tools for enforcing and implementing obligations on Nations in respect of international conventions and treaties. China is a member of the World Health Organization and as per WHO stipulations, any member country should report occurrence of any serious contagious disease in the country with prescribed particulars to WHO within 24 hours and also take careful and effective steps to prevent the spread of the disease. Though COVID-19 occurred in China as early as November 2019, China did not report immediately as required under WHO guidelines. WHO and other International Organizations should develop effective enforcement tools so as to prevent such occurrences like COVID-19 in time to come.
Founder & CEO| Fox Investor & A.V.A. Taxway Associates- Corporate & Tax Law Firm
Viibhor Agarwal is a Business & Brand Consultant as well as he is a Financial Expert his area of specialization is to guide Entrepreneur, Start-up’s and SME’s to build the brand value of business financially & legally. He has 8 year extensive experience in this sector