Measure To Save Indian Economy From Corona Virus Impact

CA Vinay Pungaliya

Coronavirus outbreak was first reported in Wuhan, China on 31 December, 2019 and spread throughout world by the end of March 2020 with the number of COVID-19 cases leaning dangerously more than 18,00,000 and the worldwide death toll crossing more than 1,03,000 till the date of writing of this article. The World Health Organization (WHO) declared the virus outbreak a pandemic in the second week of March 2020, four months after the novel virus first made headlines in the city of Wuhan, (China).

Almost all the countries are steadily going into lockdown, and businesses across the globe are operating in fear of an impending collapse of global financial markets. This situation, clubbed with sluggish economic growth in the previous year, especially in a developing country like India, which cannot segregate its presence from world economy.

Due to complete lockdown in developing economy like India the three major contributors to Indian GDP – Consumption, External Trade and Investment will be affected by and large. With rising unemployment, financial distress, and fiscal deficit. The Indian economy is likely to witness a sharp contraction of 4.5 per cent (de-growth) during Q4 FY20 and is expected to recover gradually, to post a GDP growth of just 2 per cent in FY21. Increasing USD exchange rate crossing the highest level of Rs. 76 against $ is also very challenging for major importer economy like India.

Major sector Contributing Indian GDP which is facing numerous issues to due complete lockdown in our country. Sectors like Auto ancillary, Chemical, Petrochemicals, Aviation, Construction, Metals, Telecom, Mining, Textile and apparel and our mostly unorganized but our backbone of our Indian Economy Agriculture and MSME/Retail sector. Major contributor in foreign exchange kitty Sectors like Information Technology (IT), Pharmaceutical, Health care, Export Units (Handicraft/Textile/Steel) etc. are also facing the heat due to global economy recession. But sector like IT, Telecom, Pharmaceutical helping very well to government to tackle this epidemic on ground level.

Sector wise Impact and suggestion:

1. Agriculture and MSME/Retail Sector:

In sector wise this is I have considered as last in my opening paragraph but here I am discussing firstly due to some basic reason. Majority of Indian people are dependent on this sector. This is very important sector which give huge amount of job opportunity to Indian people in both Direct and Indirect means. Since India is consumption based economy majority of consumption comes from Rural India which is highly depend on both these sectors.

Due to COVID-19 this sector is also facing huge challenges many people Jobs, their Factories/Shops/ Offices are facing stress due to complete lockdown in our country to overcome from this disease. Labour migration from their respective states to Home town is also very big issue across this sector and other sectors to.

If this sector will not be revived timely by government entire economy will face huge challenges.

Agriculture Sector:

The 21-day lockdown comes at the peak of the harvesting season. Crop is ready for harvesting in most states by the end of March. With nearly 60 per cent of India’s population being economically dependent on agriculture due to COVID 19 impact logistics and less supply of labour this sector is also facing slow down and crises.

To overcome government has done many steps like Direct cash Transfer in farmer accounts/ Pension facilities/ Crop Insurance/ Free Pesticide etc. etc. But to overcome this situation further government must emphasis the importance of this sector.

Here are some suggestion which can help this industry and to save our Indian economy to fight economic crises

• Harvesting and procurement of crops at MSP.
• This is also the right time to suspend all recoveries from farmers for a period of six months.
• Consider indebtedness relief liberally.
• Proper storage facilities- Warehouse/Cold Storage/Godowns etc.,
• Proper market place at state level for better prices.
• Supply of food grains through proper means of transport/logistics.
• Migration of Labour properly from one state to another with proper due care.

MSME/Retail Sector:

The Indian MSME sector is the backbone of the national economic structure and has unremittingly acted as the bulwark for the Indian economy, providing it resilience to ward off global economic shocks and adversities. With around 63.4 million units throughout the geographical expanse of the country, MSMEs contribute around 6.11% of the manufacturing GDP and 24.63% of the GDP from service activities as well as 33.4% of India’s manufacturing output. They have been able to provide employment to around 120 million persons and contribute around 45% of the overall exports from India.

All businesses, particularly micro, small and medium, have been facing unprecedented distress from before the onset of the pandemic. The pandemic has increased their distress multifold their Shops/Factories/Offices are closed for so many days.

India is consumption based economy saving of Indian people is far better than many other countries this saving capacity will be very helpful for these small scale MSME and retails shops. But this sector cannot be sustainable in the tough situation if things stretch beyond its limits.

Here are some suggestion which can help this industry and to save our Indian economy to fight economic crises

• Necessary tax breaks in GST and Income tax act.
• Interest subvention and deferment of liabilities considering this tough times faced by industry.
• Easy access to credit by Banks and NBFC.
• Phased manner opening of industries with complete due precautions. Easing of Export norms with financing facilities.
• More Access to big incentive like: MEIS/SEIS/ Market Development Assistance Scheme/ Market Access Initiative (MAI) Scheme etc. to MSME sector.

2. Auto Ancillary Industries including allied sector of auto component manufacture:

As we are auto ancillary industries are very capital intensive and labor intensive sector which require huge amount of capital and skilled labor. Before COVID 19 this sector is already under huge stress and global players Like TATA-JLR and many other Big names are booking their huge losses. Due to slow down in world economy due to this Chinese Virus there will be huge impact to this industry and our domestic players like Maruti, Hero Motor Corp, Bajaj and small auto component manufacturer also facing the global recession heat.

With proper support this sector will lead in providing Billions $ revenue and Job opportunities by attracting more FDI/FII/Global player to set up units in India and make India as there Manufacturing hubs like global player KIA Motors/ Hyundai etc does in past.

Here are some suggestion which can help this industry and to save our

Indian economy to fight economic crises:

• Tax Booster in Form of Short term GST rate cut to increase demand.
• Reduction in Interest rates on delayed payment from Banks. Indeed, it was done by RBI but Financial institution are done with stinginess.
• Extend the BS-IV deadline to clear the dealer level stock.
• In a scenario of disruption in the supply of key components, the industry could look at sourcing them either locally or from other countries such as Germany, South Korea, Japan, and Thailand AND reduce the dependency from China Because China is least effected due to COVID-19 Virus so they utilize this as great opportunity for them with extra cost.

3. Chemical, Petrochemicals and other allied industries:

Indian chemical and petrochemicals industry is highly depended on Import Raw material like Crude, Chemicals and other various other components. Due to slow down in World economy and less industrial output in both sector prices of crude and other commodities are at very low level. This will help our industries to take advantages of this and take lead in world economy. We are net importer in this case and our forex reserve are mostly used in payment of raw material of this industry by almost 54%.

With downturn of China this sector will be great choice for other countries to invest in India. SAUDI ARMCO is one of major investment which is going to done in Reliance Petrochemical Unit. So with proper support and proper FDI norms. Indian foreign basket will receive major Inflows from FII/Global players to invest in country.

Here are some suggestion which can help this industry and to save our Indian economy to fight economic crises:

• Review of FTP and antidumping duties to protect the Indian manufacturer from potential impact.
• A stimulus package based on production to be given to support MAKE IN INDIA effort as initiated by our Government. To became India as world Manufacturer and shift the dependency from China. It will help boost our Foreign Exchange reserve.
• Tax Booster in Form of Short term GST rate cut to increase demand.
• Proper Price Hedging mechanism to save guard the domestic industries from exceptional prices fluctuation in current scenario due China monopoly in world market along with Currency hedging as $ rate is very high due to unrest in world economy,
• Capex based relaxation in Income Tax Act apart from existing to setup or to expand the capacity.
• Fast disposal of GST refunds/duty drawback for this capital deficiency sector.

4. Aviation, Tourism and Hospitality industries:

India Tourism and aviation sector has been the 1st industry to be hit due to this COVID-19 epidemic, majorly owing to the cancellation of inbound Visas and stringent restrictions on domestic or international travel due to this a very severe chance of potential JOB Loss which account for 38 Million as per studies.

Debt laden aviation sector is also a very great concern for our Indian economy along with NO investor for our National Carrier AIR INDIA and IBC Jet Airways. This COVID-19 is drastically impacting this industry cash flow since flights and Hotels are completely under lockdown. Possible Biggest sector to take Job cut if the condition is extended beyond time.

Business stays, leisure stays, family holidays, get-togethers, social occasions, etc. are being completely curtailed and in such a scenario the hospitality sector is taking a hard hit due to this. There has been a massive decline in the restaurant and food service business.

But with proper government support this sector tourism in India will be more in coming times since India is less impacted from corona virus till date and for foreign national India will be preferred location for their holidays/vacations.

Here are some suggestion which can help this industry and to save our Indian economy to fight economic crises:

• Due to drop in Crude prices ATF (Air turbine Fuels) prices are also falling but tax burden impose by various states govt is impacting the same. Reduction in TAX rate will be very beneficial for this industry.
• Waiver of various Rental, royalties, landing, Parking and routine terminal charges for some period at least for ground flight period.
• Easing of financial stress by moratorium in Loans.
• GST holiday for tourism and hospitality industry also relaxation in property Tax, electricity duty etc.
• Salary cut from Top Management, Executive to help the financial in bad times.
• Economic Package/ Subsidies from State Govt and Central Government to encourage the tourism.

5. Construction, Metals and Mining industries:

This sector is one of the largest employment generator in the country and it provide various opportunities of employment to other allied activities. Under construction sector Both Commercial and residential sector are witnessing power demand and lower absorption due to economic slowdown NBFC crises and developer default.

The concern for the sector is that most of it has already been facing financial stress, shrinking orders and tight working capital. Now with the disruption in work, movement of labour and breakdown of the supply chain, recovery would be a challenge.

Indian economy is now shifting from Rural based to Urban Based economy. With shifting there will be some huge opportunities for construction/metals and and real estate sector which is under severe stress. But the same can be bailout from current situation and will lead in very grateful manner.

Here are some suggestion which can help this industry and to save our Indian economy to fight economic crises:

• Easing of financial stress by moratorium in Loans.
• Relaxation in norms of Affordable housing scheme as approved by various Central and State Government.
• Easing of environmental clearance for Mining Industries.
• Provide relaxation in statutory and employee related payments.

6. Textile and apparel sector:

India’s textiles sector is one of the oldest industries in Indian economy dating back several centuries. Even today, it is one of the largest contributors to India’s exports with approximately 13 per cent of total exports. The textiles industry is also labour intensive and is one of the largest employment provider in the country. The textile industry employs about million people directly and indirectly.

Due to COVID-19 virus demand for the textile products and also the domestic sales have come down this is impacting thousands of industries and labour which are directly and indirectly linked to this industry.

The slowdown in the Chinese economy has rendered the cost of textile production in China high. So, Chinese textiles manufacturers have the lost competitive advantages of lower cost of production in the last few months. This has offered an opportunity for Indian players to grab the market share of China in the developed world, especially the European Union and the United States, which cumulatively comprise around 60 per cent of the global export market. This is the right time to increase our market share in exports.

Here are some suggestion which can help this industry and to save our  Indian economy to fight economic crises:

• Tax Booster in Form of Short term GST rate cut to increase demand.
• Fast disposal of GST refunds/duty drawback.
• Easy mode of finance and moratorium in existing facilities. Interest Subvention Subsidy for Loan on various facilities. Capital Based Subsidy for new Unit setup.
• Temporary Exemption of all raw materials, dyes and chemicals, intermediaries, spares, accessories, etc., from anti-dumping duty and basic customs duty.
• Enhance IES/MEIS benefit for all textiles and clothing exports.

OUR EFFORTS FOR SOCIETY AND FOR NATION

Government is trying their best efforts to save the economy along with health of its people but Indian customs and values are also helping us to fight against this virus by staying home, eating health foods and spending time with family. Due to our government tremendous effort we are least impacting from COVID-19 virus in terms of lives of people as compared to developed countries like USA, China, Germany. Italy other European Countries.

Even though sectorial factors are highlighted in this article majorly for government but for overall recovery of Indian economy the following points

need to be considered as citizen of India by us also to save our Indian economy:

1. Higher emphasis on Saving of Household Income. In this tough time OUR SAVING help us a lot.

2. Social Distancing and Precaution to be taken as suggested by government to save our life and of other also. Meeting/Conference only through by digital mode.

3. Helping the Poor and needy person specially the staff member who are with us in our great time we should also abide with them in this tough time.

4. Transportation / Movement of Goods and Labour with complete safety and precaution.

5. Proper Sanitization of premises- Factory/Office/ Go down’s/ Shops etc to reduce chances of infection.

6. Procure MADE IN INDIA products as much possible to help more to domestic industries.

7. Adhere to government rules, regulation and always respect the warrior of

COVID-19- DOCTORS, MEDICAL PROFESSIONAL, POLICE AND CLEANERS without them we are not for nothing.

Thanking you, for reading please ensure social distancing and stay home stay safe. India fight corona India win Corona.