Roads2Future conducted an exclusive webinar for the students of MMK College on the topic ‘Impact of Covid-19 on the Indian Economy’. The speaker of the webinar was Prashant Jain, who is a Banking Profession with 6+ years of experience.
The speaker started the webinar with the explanation on how COVID-19 or the 2019 novel coronavirus has taken the world by storm and how the world is currently still fighting a brutal fight against it. With its advent, it has hampered not only the lives of people around the world but has crumbled economies and brought the world to its feet. The world economy before COVID-19 was not exactly witnessing a steadfast growth, its year on year growth was restricted to around 2.9% as opposed to the ideal growth rate of roughly 3.4% that it was forecasted to grow at during January 2020 by the IMF. This bleak economic scenario has further plunged the economies of most countries downwards.
If we look at India in particular, sectoral decline in economic activity has been cited as one of the main issues affecting the economic health of the country.
Automobile sales in the last quarter have been declining even for some of the most trusted brands in the country. FMCG sector which consists of two categories of good (essential and non-essential) witnessed a constant demand base for the essential goods as the country went into a massive lockdown that is ongoing till date. The non-essential goods segment on the other hand, which is one of the main revenue generating segments for FMCG companies has witnessed a steady drop in demand by 71%. This brings us to an interesting question;
What would happen if everyone started saving?
It is a simple transmission mechanism. One persons’ expenditure is another persons’ income. So, the higher the expenditure, the higher someone else’s income and the higher their spending and so on. With consumers shifting from a consumption driven attitude to a savings driven one, it is going to be difficult to rebuild trust in the consumer’s mind about the state of the economy to encourage them to spend at pre COVID-19 levels if not more.
BFSI sector is also witnessing tough times due to loss of jobs during this crisis, so there are higher chances of people defaulting on their loan payments giving rise to higher NPA numbers despite the moratorium period extension.
The speaker said that given this scenario, the way forward would require a holistic approach with both government policy and monetary policy joining hands to propel the economy to better times. With this objective in mind, the Reserve bank of India has taken many monetary policy measures which comprise of repo rate reduction to 4.40%, reverse repo rate reduction to 3.75%, cash reserve requirement reduction to 3%.
Targeted long-term repo rate operations amongst the most notable monetary measures all aimed at infusing liquidity in the economic system and encouraging sufficient circulation of money to boost economic activity. To complement these efforts which are taking time to show results due to uncertainty, the government has decided to step forward and provide fiscal stimulus to support the people at bottom of pyramid. The government has thus declared targeted support packages for the poor, increased payments by 11% under the MNREGA scheme. These efforts are banking upon Jandhan Accounts, Aadhar and Mobile (JAM).
Definitely with all this happening to sustain the economy, individual businesses and consumers have already begun to enter what we now call the new normal, which consists of much more uncertainty but at the same time provides a renewed attempt at building livelihoods and the economy as we know it. To make the most of opportunities at hand to stay ahead of the curve is what is going to be the biggest learning from this global pandemic 2020.