” COVID-19 Impact – ‘ From Cash Flow to Anxiety Flow – India Centric ‘ ” – May 28, 2020.

          The world will be witness to an unprecedented economic slide due to COVID-19. A nation of 130 crore people, India, is also facing the economic wrath of Coronavirus at a time when it started facing the music of unemployment and low productivity simultaneously.

          Let me turn to my observations as a common man – I am not an expert in Economics, though.

          I used to read about the 3 periods when India faced serious economic downside during 1958, 1966, and 1980. The singular reason in each of these instances was  “the failure of monsoon”. Today’s economic predicament is different prompting everyone to attribute the difficult situation to the Coronavirus.

          Lockdown with all its inherent benefits in terms of public health safety is also an inevitable contributor to our economic challenges of the day.

          Agricultural production is on a high even during this lockdown period. Its contribution to our GDP is also increased now. But production from other means minus agriculture is reduced by 6%. Hence, the GDP fall in this quarter could be to the extent of 25% painting a bleak outlook for our economy. An economic war is in the offing.

          Add to this the woes of our MSMEs (Micro, Small, and Medium Enterprises) and the picture is not anything but discouraging. Our government has been wise to announce relief measures to the extent of 3 lakh crores – for the benefit of MSMEs.  About 45 lakh entities will benefit according to the Government. If everyone of them apply for the benefit each will get RS 6.66 lakhs. 

          The Government has given a time period of 4 years for the repayment of loans. The borrower can start repaying the principal amount after 12 months. The interest rates will not change. The plan/scheme will be open till October 31. Employees PF share will be paid for 3 months. Distribution of loans by banks, and EMI concessions have also been part of this bonanza.

           There are totally 6.34 crore of them (MSMEs) in the country today. About 51% are located in rural areas. Prevailing general perception about the Government’s relief measure, however, is – “inadequate and unsatisfactory”. Borrowers with a poor record of repayments earlier will face difficulties in securing fresh loans. Bank’s have not received any instructions/communication from the Government in this regard.

          Borrowers’  expectations lie in the following :  (a) return of the  ‘fines’  paid by them in respect of GST ;  and  (b) 10% of the amount to be paid to those interested in securing jobs. They cannot afford to take loans any longer because their capacity to repay has been lost. They have already come to the margins of death.

          What they plead with the Government : 1. Unforseen circumstances and occurrences in the past prevented them from paying back what they owed.  2. Loan to be granted now will be an uncertain source of income that can get them into a debt trap.  3. They would like to change their lives and make efforts step by step to climb out of their debts.

          They seem to sense their responsibilities, though debt of gratitude is not visible.

          The strength of Indian economy also lies in States contribution. But in today’s situation the States are yet to receive their due share of revenue from GST fully, though it has empowered the central government in terms of economic control. And States should rise to the occasion and make their role perceptible.

           With the Corona attack on one side and economic slide on the other, unemployment is also growing. Migrants leave for their native heath in droves. Government is doing all it can in terms of financial aid. Rigid economy with free spending is, however, not possible. Only plausible solution at this juncture is to inject more quantities of cash in the economy with the unavoidable risk of increasing the national debt. Risk in terms of time whether this can ease the situation has to be taken. Big corporates in great measures have also to chip in and help keep the economy warm. Our extremely good cash flow of 2019 and earlier is turning into an anxiety flow now.

           Our PM is a revivalist. Everyone expects that he will sow the right seeds for the revival and revitalization of  economy. Truth, hardwork, and practical perspective will alone make the recovery possible.

   ” Dieu avec nous”

   Thursday, May 28, 2020 –  11.29 a.m. (IST)

   Tidbit :. ” Economy is too late at the bottom of the purse ”  –  Seneca.