2020 has blessed the world with a deadly impact of COVID-19. The ever-growing list of casualties along with continuous destruction to the economies is pushing countries around the world on a brink of financial crises. India, among others, is faced with a mammoth task to save the lives of its citizens while keeping its economy alive. Honestly, it is easier said than done.
With a massive hit to the demand and supply elements, close to 80% of the Indian companies have witnessed a decline in its cash flows. According to a survey conducted by the Federation of Indian Chambers of Commerce and Industry, 53% of the Indian businesses have recorded a slowdown in its operations, that too in the early stages of COVID-19. They expect to see much worse outcomes in the future. The survey also disclosed that 42% of business owners would take up to 3 months to see normalcy in their operations.
In addition to this, the country is already going through a 4.7% growth rate which is the slowest in the last six years. All these facts point towards a single direction- non-payment of loans, taxes and most importantly, employees’ salaries.
What Should Be Done To Save The Indian Economy?
With the entire country on lockdown, more businesses will tend to suffer in the coming days. It is estimated that the lockdown will cost USD 120 billion or 4% of the GDP. It is safe to say that a combination of the financial, fiscal and monetary measures have to be adopted to give a boost to the businesses.
- RBI should cut down the cost of funds by reducing the policy rates. It should also maintain a sufficient flow of funds in the market. This will offer liquidity support to banks, companies, and NBFCs.
- Banks should adopt a flexible approach to reschedule payment terms.
- Even if there is a shortfall in tax collection, the government should not cancel its plans for capital expenditure.
- To help the companies in the hotel and aviation industry, Insolvency and Bankruptcy code should be suspended for a while. This will help them to manage their existing operations and keep afloat during the crises.
COVID-19 will not go down without an easy fight. It has laid a tough path for the Indian government to create a stable economic environment in the country. Hopefully, with the help of the above measures, the Indian companies will have adequate ammunition to go head to head with COVID-19.