NEW DELHI: With country after country from the US to the Great Britain and France coming out with loan guarantees and income-transfer schemes to protect livelihoods, many have started asking when India will respond with its package to counteract the economic freeze which seems to be coming in the wake of the coronavirus pandemic.
"The crisis has hit the services sector – travel, hospitality etc. - hard to begin with. But the impact on overall demand and manufacturing is yet to unfold. India will have to forget about fiscal deficit targets and come up with strategies to help impacted sectors," said M Govinda Rao, former member of the PM's Economic Advisory Council.
Officials said the Finance and Commerce Ministries and the Niti Aayog were studying the economic impact of the ongoing pandemic threat to India. Officials said monetary and fiscal response measures were being studied.
The US government has proposed a $ 1 trillion package, which will include direct cash payments to Americans, to help them cope with the economic fallout of a crisis that has seen businesses being shut down and cities locked down.
The US Treasury Secretary has warned that without the package, the unemployment rate could spike to nearly 20 per cent from the roughly 3.5 per cent level in February this year.
"Besides sectoral packages, we too will have to think of a general package to protect the livelihoods as the services sector is by far the largest in our economy and its woes will naturally translate into lost jobs and reduced incomes and demands," Professor Ravi S Srivastava, former Chairman of the Centre for Regional Studies, JNU, pointed out.
The services sector accounts for 54.4 per cent of the GDP.
There are also worries that the ongoing crisis could result in bankruptcies and companies as well as banks have started discussions with regulators and the Government seeking relaxation in norms and delayed payments. A spate of bankruptcies could well tighten credit further, worsening the situation for the economy.
Economists point to British and French packages that promise hundreds of billions of dollars as loans and loan guarantees to businesses to protect them from going under and to protect jobs. France has said that if need be nationalisation of firms will also be considered.
Rating agency CRISIL says some 875 companies are being monitored as there is fear across nine sectors for financial weaknesses which may come about.
Subodh Rai, Senior Director, CRISIL Ratings, said, "Lower business volumes and suboptimal efficiencies will impact profitability... While some affected companies may initiate cost-curtailment measures, these may not be enough given high fixed costs."