Financial Hour

COVID-19 pandemic lockdown in India: Financial system may suffer but Stage-3 could be averted

The way India exists the lockdown and sustains the financial impacts would demonstrate its reliability as a global alternative for the future.

It has been about 2 weeks since the Indian government has announced the lockdown amid a rising number of cases due to the pandemic Coronavirus. From Indian Railways to Metro, to airlines, top manufacturing companies, among others, have suspended their services— taking a toll on the economy. Many IT companies and private entities have opted for “work from home”— observing losses, yet the number of positive cases has roughly risen above 4,400 in India, one major contributor being infamous Tablighi Jammat commemoration in New Delhi.

Despite the rising numbers in the last couple of days, India’s good old nation-state, riding on strong nationalist sentiments, seems to be taking the centre stage. Each government is compelled to devise its ways to cope with the crisis, thus contain the economic fallout.

If countries like South Korea have fought the COVID-19 battle on the back of their strong public healthcare network, India has relied on its public administration. The fight so far has been around enforcing social distancing and heavy contact-tracing, with Police and security personnel ensuring and enforcing the lockdown across the nation.

At present, the massive effort is underway to trace the extent of the Tablighi Jamaat. If the country is somehow able to deal with the unexpectedly big numbers impacted by this cluster, it would be because of its ability to conduct large-scale mass contact-tracing.

Coping with economical impact due to COVID-19 pandemic:

The country has entered into this crisis with a huge fiscal deficit. So, even if India pulls through this challenge, the pandemic is likely to impede the financial system. According to Raghuram Rajan, the former Reserve Bank of India Governor, the coronavirus pandemic is likely to be the biggest economic crisis since the emergency.

“Spending on the needy at this time is a high priority use of resources, the right thing to do as a humane nation as well as a contributor to the fight against the virus,” he said.

Favourable terms of loans to SMEs by SIDBI, channelization of funds to small suppliers by large firms with the help of bond markets could arrest financial losses and add to the growth of the companies in the upcoming time. The way India exists the lockdown and sustains the financial impacts would demonstrate its reliability as a global alternative for the future.


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