Fiscal Stimulus- A hope to rescue the Falling Economy

PM Modi has declared a lockdown of 21 days in India as a measure against coronavirus break down across the country. India is a way ahead of three countries who have been putting strict restrictions on the people to stay locked down in their homes. The pandemic has been showing fast growth in India for the past few days which lead to such decisions in the entire country. All the services such as flights, domestic, passengers have been suspended for an entire month to avoid people gathering at one place which will boost the virus pandemic that other countries are suffering badly. Many huge companies and manufacturing units have been closed for companies like Maruti Suzuki India Ltd,  Asian Paints Ltd, Titan Co. Ltd, and Dabur India Ltd for a time period of 21 days to fight against the virus.

There was an urgent need to implement social distancing and avoiding crowds at places and lockdowns of offices and shops, the lockdown has a severe economic impact which is a great concern for the country.

The companies or economists cannot suggest a strategy or pattern considering the economy as a lot of things totally depend upon how the things evolve after the lockdown of 21 days and at what stage will be the financial condition of the country.

UBS Securities India Pvt. Ltd has lowered down its FY21 gross domestic product (GDP) growth estimates as per the conditions around. This has happened for the second time in the month of March. The reports state that there will be a further economic slowdown even after the lockdown of 21 days. Analysts did not expect such a lockdown and its impact on the economy as it was announced recently.

Chief India economist at UBS Securities,  Tanvee Gupta Jain states that the conditions and situations of the virus are in the earlier stage of evolution as of now and the outcomes after the lockdown after 21 days in uncertain and cannot be commented upon for now,  they still think risk to our forecasts are skewed to the downside most probably says Tanvee to her clients.

There is an increase in the calls from the central government for stimulus as the  growth estimates going into a tailspin. Some of the experts and the economists suggests the government to borrow the finances from the future to make provision to fight against the pandemic which is causing the current economic crisis in the country. As the scarier option will be to not do anything which will help to keep the fiscal deficit from slipping will be an alternative as  India’s stretched fiscal position has been a point of concern for the analysts.

Jefferies’ analysts say that they believe that at least 1 ppts which may be more certainly  fiscal target easing would be required.

There is a fear that a massive number of people would loose their jobs because of the current economic crisis caused by the shutdowns in the country. The demand for goods and services which was already less will lower down if the people lose employment in large numbers. Even before the coronavirus breakdown, Indias economy is also grappling with the recent troubles of a private sector bank.

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