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Modi’s 10 trillion Economy Affected by COVID-19 Coronavirus

INDIA: Our Prime Minister Narendra Modi has set a target of USD 5 trillion economy by 2024, Which will be deeply affected due to COVID19 Coronavirus.

All the biggest economist saying that the economy will not be stable for the next many years after the Coronavirus Lockdown. Big shifts in stock markets, where shares in companies are bought and sold, can affect many investments in pensions or individual savings accounts (ISAs).

The FTSE, Dow Jones Industrial Average and the Nikkei have all seen huge falls since the outbreak began on 31 December. The Dow and the FTSE recently saw their biggest one-day declines since 1987.

Investors fear the spread of the coronavirus will destroy economic growth and that government action may not be enough to stop the decline. In response, central banks in many countries, including the United Kingdom, have slashed interest rates. That should, in theory, make borrowing cheaper and encourage spending to boost the economy.

On March 26, finance minister Nirmala Sitharaman announced a $23 billion package aimed at cushioning the disruption. India’s central bank joined the fight a day later with sharp interest rate cuts and a slew of unconventional measures aimed at making credit available to beleaguered businesses.

In India, GDP growth is already at a decadal low and any further dent in economic output will bring more pain to workers who have seen their wages erode in recent times.

The government on Saturday revised the Foreign Direct Investment (FDI) policy to curb “opportunistic takeovers and acquisitions” of Indian companies amid the COVID-19 crisis. Companies in a country that shares a land border with India, such as Pakistan and China, will have to approach the government for investment in India. 

According to the Ministry of Commerce & Industry, a non-resident entity can invest in India, subject to FDI Policy except in those sectors and activities which are prohibited. However, an entity based out of India’s neighbouring countries can only invest under the government route. 

FDI in India is allowed under two routes – automatic and government. While a company does not need government approval for investment through the automatic route, it needs to have a go-ahead from the Centre to invest through the government route. The Governor of the Reserve Bank of India (RBI), Shaktikanta Das, on Friday addressed the media in New Delhi regarding some of the key financial decisions in the wake of the coronavirus disease (COVID-19) pandemic outbreak in India, which is now spreading like wildfire across the length and breadth of the country.

Notably, this is the RBI Governor’s second media briefing since the virus outbreak. He acknowledged that the current health crisis is a ‘trial’ for ‘humanity’ and that the RBI has played a proactive role in monitoring the situation closely.

  • LCR requirement of banks brought down to 80% from 100%; to be restored in phases by April next year.  
  • Banks not to make any further dividend payout in view of financial difficulties arising from COVID-19.  
  • 90-day NPA norm not to apply on moratorium granted on existing loans by banks.  
  • Rs 50,000-crore special finance facility to be provided to financial institutions such as Nabard, Sidbi, NHB.
  • RBI to announce new measures to maintain adequate liquidity in the system, facilitate bank credit flow, ease financial stress.
  • Surplus liquidity in the banking system has increased substantially as a result of central bank actions.
  • No downtime of the internet or mobile banking during lockdown; all banking operations are currently normal.
  • The contraction in exports in March at 34.6% much more severe than the global financial crisis of 2008-09.
  • Automobile production, sales declined sharply in March; electricity demand has fallen sharply.
  • The impact of COVID-19 not captured in IIP data for February.

RBI Governor Shaktikanta Das assured it is expected that India’s economy will make a sharp turnaround in 2021-22. For the current financial year 2020-21, Das said that the International Monetary Fund (IMF) has projected a sizable reshaped recovery, close to 9 percentage points for the global GDP. India is expected to post a sharp turnaround and resume its pre-COVID-19 state, pre-slowdown trajectory by growing at 7.4% in 2020-21.

Industries That Can Revive Indian Economy:

Medical and Pharmaceuticals: Definitely after the huge loss to the complete world due to Chinees Virus, the maximum companies have decided to gift China Economic inflation for that the huge companies are started withdrawing their infrastructures from china and they will set up to INDIA, Thailand, and Malaysia so we can expect more FDI’s on Medical industries.

Agricultural Sector: Agricultural reforms should ensure easier access to inputs like seeds, technology, power, finance, and insurance. They should allow for greater leasing of land and cooperative sharing of resources like tractors. They should affect greater connectivity, both virtual and through logistic networks, of the farmer to warehouses, rural industry, and final consumers. As these reforms are implemented, constant and distortionary government intervention at every stage of production, including in pricing and procurement, should be eliminated. Much of it should be compensated by a direct cash transfer to farmers based on acreage. The broader intent should be to enable some farmers to move out of agriculture, allowing the remaining farmers to enjoy scale economies.

Information Technology: As due to work from home many companies which are depended on only office infrastructure will definitely shift towards the online infrastructure and that will give a boost to the Information Technology company

Finance and Fintech: Finance and fintech will take up the next biggest large sector where investors will invest money as many of the Fintech Startups will start and its a best time, the most of the people is going out of cash and fintech companies will help.

Telecom Sector: Finally, the telecom sector deserves special mention, for it is where a promising growth sector has morphed into a deeply distressed one, which is heading toward a monopoly or duopoly through much of the country. In the short run, the objective has to be to preserve sufficient competitors in the sector-once again, the Centre is creditably starting to move after disregarding mounting problems for a while. In the longer run, India should re-examine its regulatory process and ensure a level playing field within the sector.

Finally, India needs to lay out a credible roadmap and time frame over which it will return to fiscal rectitude. As suggested by the FRBM committee, a commitment to bring public debt down to a target level over the medium term, and the creation of a watchdog institution like a fiscal council to limit creative accounting, will ensure India has some fiscal space to act today. Of course, India has consistently postponed fiscal consolidation when consolidation has required hard choices. Much as with inflation targeting, the government will have to think long and hard about how it can limit its own future flexibility. The rewards in terms of low interest rates and fiscal space will be well worth it, much as inflation targeting has brought India low inflation and a stable exchange rate. It does mean, however, that the government will have to accept institutional constraints on its own actions.

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