The special COVID-19 economic task force announced by Prime Minister Narendra Modi would likely work on an economic package for the sectors most affected by the coronavirus outbreak as also people working in the informal sectors. Led by Finance Minister Nirmal Sitharaman, this task force has to take drastic steps like relaxation in NPA norms, deferral of tax payments and announcement of income support to the people working in the unorganised sector.
The Finance Ministry, it seems, has already identified some of the worst-affected sectors as the Finance Minister has, on Friday, called a meeting of ministers of civil aviation, MSMEs, tourism, and fisheries, animal husbandry and dairying to assess the impact off coronavirus on these sectors.
Travel, tourism and hotel industries are some of the worst-affected sectors due to travel bans, social distancing and suspension of business activities. While other related sectors like fuel minerals, electricity and water and rubber, plastic, coke and petroleum products, etc are also likely to be impacted adversely.
The coronavirus outbreak has already started to have its impact on the economy with rating agencies already revising downwards India's GDP growth forecast in 2020-21. CRISIL on Thursday revised the GDP growth forecast for 2020-21 from 5.7 per cent earlier to 5.2 per cent.
Given this situation, the task force has to take some drastic measures. Economists and industry experts have been looking for some economic package from the government to come out of the slump, especially since other affected countries have recently announced stimulus packages.
They suggest that central government should take steps on both monetary and fiscal fronts, as well as work in co-ordination with the states to tide over the situation. Some of the proposed drastic measures include rate cuts and relaxation in NPA norms for sectors impacted by the coronavirus outbreak.
"Just like any other country, we need to support our economy. Cut interest rates, do an intervention in the market to buy gilts, PSU bonds and high credit corporate bonds. Provide loan subvention to industry which needs support," says Nilesh Shah, MD, Kotak AMC.
Sachchidanand Shukla, chief economist, Mahindra Group, says banks should be allowed to consider a temporary restructuring of loan terms for the most-affected borrowers. He also calls for fiscal response to support families' and firms' balance sheets. He is in favour of targeted measures for directly affected sectors like aviation, retail, leisure, etc.
Steps to directly help the affected sectors also include Goods and Services Tax (GST) rate cuts, deferral of tax payments, etc.
"In days to come, the struggling sectors, particularly travel, hotel, food industry will certainly approach the GST Council as well as government to request a reduction in GST rates to enable them to get over the loss of business. We hope the GST Council looks into the aforesaid on a priority basis and announces a suo moto reduction in GST rates for the impacted sectors including travel, hotel and food industry, etc," says Pritam Mahure, a Pune-based chartered accountant.
Experts also demand special packages for individuals, especially, those working in the unorganised sectors. An SBI Research report says that the increased excise revenue from oil should not be used for bridging the fiscal gap and pleasing the markets, rather it must be used as a fiscal package for income support to the people working in the unorganised sector who are already facing the brunt of loss of jobs.
Sachchidanand Shukla of Mahindra Group says government should leave more money into hands of people through fuel price cuts, subsidies, free diagnostics and curative policies for those quarantined.
Nilesh Shah says tax cuts and direct transfer schemes like Pradhan Mantri Kisan Sanman Yojna will support daily wage earners who have been impacted by coronavirus.
Many countries affected by the coronavirus outbreak have announced economic rescue packages recently.
Italy, which has reported close to 3,000 deaths due to the coronavirus, had announced a rescue package of 25 billion euros ($28 billion) on March 16. The package includes 10 billion euros allocated to support employment, 3.5 billion euros to strengthen healthcare system and individual cash bonuses to the Italians still working during country-wide lockdown.
France government also announced that it will mobilise 45 billion euros ($50.22 billion) in crisis measures to help its companies stay afloat.
The United Kingdom has sanctioned 330 billion pounds ($424 billion) to fight the coronavirus pandemic. The amount includes 12 billion pounds to help national health services. The government has also announced loan guarantee to businesses threatened by the coronavirus pandemic. In addition to this, the UK government has also announced 20 billion pounds of tax cuts, and a three-month mortgage payment holiday for borrowers affected by COVID-19.
China's central bank recently launched $79 billion stimulus effort to help the country's ailing economy, while the US government allowed the Federal Government to distribute up to $50 billion in financial aid to states, cities, and territories.