Covid 19 And Economic Challenges Ahead – Economics – Free PDF Download

• Recently, India has rolled-out various policy measures to deal with Covid-19, India also has to brace for multiple impacts over an uncertain timeline that could last a year.
• Welfare Measures: The government has taken various welfare measures (encompassing both food and money) to help the most vulnerable and also to partially meet the cost of retaining workers in smaller enterprises, for the next few months.
• Test and Cost: For the size of India’s population, the quantum of tests conducted so far seems to be too few and the government should bear the entire cost for testing.
• Comparison with Developed Countries: Emerging Market Economies (EME) like India,can hardly match what developed countries like the US, UK and Germany have announced.

Challenges Ahead for India

• Fiscal deficit: India’s national fiscal deficit is perpetually high, and it is about to get larger.
• Due to this first, revenues will decline sharply; and, secondly, state governments who are the first responders of the health emergency will be hard pressed.
• Foreign Investment: Foreign portfolio investment in Indian equity and bonds is about US$ 300 billion.
• In March US$ 15 billion exited.
• India’s equity performance during March in dollar terms was low compared to other emerging market economies.
• Trade barrier: India also imposed trade barriers to imports through higher custom duties.
• High import barriers ultimately undermine national competitiveness.
• Banking Sector: Non-Performing Assets (NPAs) will spike in virtually all economies in the coming months.
• International investors: International investors will begin to sharply distinguish between countries along the principal measure of how successfully the health challenge is being met, which will determine how quickly and durably individual economies will get back on their feet.

CONCLUSION

• Higher customs duties on imports must be checked, which will increase India’s competitiveness and remove trade barriers.
• Issues related to the banking sector like NPAs must be dealt carefully.
• If the fiscal and monetary responses are strengthened, the likelihood of serious consequences for macroeconomic stability increases.

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