E-Paper
Here is how the world is coping with Covid-19’s economic fallout. Can India learn?
Here is a look at steps that major countries have taken in order to deal with the economic fallout of the virus.
In his first address to the nation after the outbreak of the coronavirus disease (Covid-19), Prime Minister Narendra Modi acknowledged the growing economic distress due to the disease and announced that a high-level economic task force led by the Finance Minister would decide on measures to address the situation. He also appealed to employers to be sensitive to those who could not come to work.
Any economic relief provided by government will be important since the fallout of the disease has caused major disruption to businesses, with sectors such as tourism, aviation and hospitality being among the worst affected. This has also caused the Indian stock markets to tank more than 25 % in the last 2 months and weakened the rupee by more than 5% since the beginning of this year. Economic relief by governments is also important since an official indicator released in China earlier this week showed that around 5 million jobs were lost in that country in the first 2 months during the Covid-19 outbreak, as per a CNBC report.
Here is a look at steps that major countries have taken in order to deal with the economic fallout of the virus.
As part of its stimulus package, the United States (US) government is planning to give $1000 per adult and $500 per child in a scheme akin to direct money transfer as part of its efforts to help its citizens mitigate the economic impact of the coronavirus crisis. In its recently approved $100 billion coronavirus relief package, the US government has included provisions for free testing for Covid-19 and paid emergency leave. This also includes unemployment insurance (benefits) for its laid off workers . The Federal Reserve has cut down its interest rates by 150 basis points to nearly zero in March and announced measures to inject $700 billion into the US economy in order to increase the monetary supply. 100 basis point is equal to one percentage point.
In United Kingdom (UK), the Bank of England (central bank) has slashed the bank rate by 50 basis points to 0.25% to tackle the financial upheaval caused by the Covid-19 outbreak. The UK government has also announced a 330 billion pound ($398 billion) package (which is around 15% of its GDP) of government- backed loans and guarantees to support its businesses. Among other things, this package offers support to businesses that are paying sick pay to their employees and also grants funds to smaller businesses up to 25000 pound to aid them in this crisis.
To tackle the economic emergency due to Covid-19, France has announced a 45 billion euro ($50 billion) aid for small businesses and employees mainly through deferral of tax payments. It has also announced to guarantee bank loans up to 300 billion euros to avoid any risk of bankruptcy by small and medium companies.
The above measures by these countries show that they have mainly used stimulus to help their economy and are also considering cash transfers in some cases to help their people.
Can India implement a universal basic income like the United States to help its citizens at this time?
An analysis by Tadit Kundu published in Mint in January 2019(https://bit.ly/2IZyM9x) shows that providing all individuals with a poverty line-equivalent universal basic income( ₹ 1,180 per month for each individual, in 2017-18 prices) would cost around ₹ 19 trillion or 11.4% of gross domestic product (GDP). The story also points that a universal basic income support of 16000 rupees per year to a household of five as suggested by economist Pranab Bardhan would cost ₹ 4.3 trillion or 2.6% of GDP. In comparison, the allocated expenditure for PM KISAN and MNREGA in 2019-20 union budget was 0.93% of the GDP (2nd Advanced estimates).
