With the increase in Covid-19 pandemic, Hon’ble Prime Minister Sh. Narendra Modi has announced a complete nation-wide lockdown for 21 days beginning from mid-night of 24th the March 2020. It can be evidently seen that public has strain of Covid-19 on the one hand and anxiety of economic slowdown on the other hand.
Amidst all the news, a basic question arises
“IS INDIA READY FOR COVID-19 RECESSION?”
Recently, we have seen multiple cases of share market bleeding red. Further, various economists are quoting serious remarks about economic slowdown which we are going to face in future.
Mark Zandi, Chief Economist at Moody’s Analytics has quoted in Vox, “This is an economic tsunami,”.
Christina Romer, the Berkeley economist says, “I feel like we need a new term for the kind of unemployment we’re going to have.,”
How Indian Government is tacking the situation?
The Hon’ble Finance Minister Smt. Nirmala Sitharaman along with Minister of State Finance Sh. Anurag Thakur has held a press conference at 2PM on 24th March 2020 to announce few measures to curb panic of deadlines amongst taxpayers, professionals and corporate players.
- Extension of various deadlines under Income Tax, GST, ROC
- Strict monitoring over bankruptcy provision, to prevent public from forced bankruptcy
- Removal of ATM usage charges and minimum balance requirements
These are only deadline relaxations but after announcement of nation-wide 21 days lockdown, the people will be looking for some economic measures to fight COVID-19 RECESSION. We have tried to look for few immediate actions that are required maintain economic harmony:
- Much expected extension in financial year closure date to 30th June 2020.
Income Tax Employee Associations have warned the government, “Not extending the March 31 fiscal deadline will lead to a “Himalayan blunder” of endangering lives of taxmen”
There is high demand to extend this financial year closure from 31st March 2020 to 30th June 2020, to reduce panic in closing books.
{Please note, various deadlines for filing of returns, SEBI compliances, auditing (CARO) norms, etc. has already been relaxed to 30th June 2020.}
- Postponement in collection of EMI, rent and utility bills
It is highly important to give an option to middle-class for postponement of regular outflow burden. There will be low inflows for major section of the public and most of them will start operating on their reserve funds, and it is highly important from government to announce some relief in regular outflows.
- Suspension of trading (shares, Commodities, Derivatives)
In last few days, we have seen lower circuit, stock market bleeding red and black days. Although the crude oil prices have come down on one hand and commodity price is falling constantly on the other, still the market is not doing well. The obvious reason is general public taking out money from the stock market and saving it to the reserve.
The best way to stop more revenue loss to general public is by suspending all types of trading at least till lock-down period.
- Mortarium for Income Tax and GST legal proceedings (assessments and search)
Firstly, it is practically not recommended for any taxmen to go office and work (scrutiny and assessment) or conduct searches. However, as a measure to boost confidence of public, it is better to announce mortarium of 21 days on Income Tax and GST proceedings.
- Announcement of support packages to Covid-19 affected corporates
The government needs to announce support packages to Covid-19 sectors. Otherwise the panic and lock-down due to virus may lead to collapse of many essential sectors (for say, aviation sector, cab operators, e-commerce operators, restaurants, hotel, delivery chains) and ultimately giving a dent on the economy in the form of loss to revenue, unemployment etc.
- Security to employees (regular and contractual), daily wage workers and agents
The government should announce some security measures to employees, daily wage earners and agents. The lock-down may lead to mass retrenchments and non-payment of salaries. The government needs to ensure that appointment, pay and social securities are protected.
Apart from these steps, the government also need to bring out some positive statement in public to boost confidence, through press release/ interviews of big corporate owners and influencer.
But still a question remains, what to expect after Covid-19 lockdown period is over?
- Pressuring on public to invest in public bonds.
The government will burn out major reserves in fighting the Covid-19 and will look for immediate cash flows. One of best practice for government is to issue public bonds.
- Reduction in Repo rate by the Reserve Bank of India
The Central bank may look for reducing Repo rate, this will give more Disposable Income into the hands of the public and a great push to slowed economy.
- Relief packages for corporates/ general public
The government may look to announce relief packages for Corporates/ general public through Income Tax, GST or in the form of subsidy.
- Introduction to tax relief for traders in stock market
Although it is highly expected that stock-market will boom after lock-down, however, to make it better, government may relax Capital Gain Tax and STT provisions for much better performance.
For those, who are thinking, how other countries are fighting economic breakdown? Here is a list:
- Many top economies like USA, China, Italy, Iran etc. has announced packages to boost economy.
- People’s Bank of China has announced that $79 Billion has been freed up to aid coronavirus hit firms.
- In Italy, a monthly subsidy of 600 euros have been announced for 5 million workers including those self -employed or seasonal workers. Further, Itialian families can now apply for permission to suspend their mortgage payments if business shutdowns due to coronavirus threaten their livelihoods.
- Germany announced that it would provide a stimulus package of up to 550 billion euros ($610 billion) to companies hit by coronavirus. The government has also relaxed tax norms for German enterprises hit by the pandemic. The German government is also expanding its subsidies to compensate jobless people.
- The Germany government has launched a fund of 10 billion euros to buy stakes in companies struggling due to coronavirus hit.
- Switzerland has pledged 10 billion Swiss Franc ($10.5 billion) in aid for its companies. Its aid programme is targeted at small businesses and freelancers who have been hit by government enforced lockdowns amid the coronavirus epidemic.
- In Spain, the government has promised loan guarantees of 100 billion euros for small and medium-sized businesses hit by the pandemic.
- The UK government has announced 20 billion pounds of tax cuts, a three-month mortgage payment holiday for borrowers affected by COVID-19.
- In New Zealand, 5 billion New Zealand dollars will be allocated for wage subsidies, 2.8 billion New Zealand dollars for income support, 2.8 billion New Zealand dollars in business tax relief and an amount of 600 million New Zealand dollars has been allocated for the airline industry.
As a citizen of the nation, we need to put all our confidence in the government and follow all the guidelines strictly.
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