Nagpur City No 1 eNewspaper : Nagpur Today

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    Published On : Mon, Sep 21st, 2020
    Featured | By Nagpur Today Nagpur News

    Measures Taken by The Indian Government So Far to Prevent Economic Instability Due To COVID-19

     

    With the COVID-19 pandemic increasing in intensity every passing day, it has become a point of heavy concern, especially for a country that’s as densely populated as India. With so many people at the risk of getting infected with the virus, it is still not the only threat that looms over India. With shut businesses, reduced demand, increasing unemployment, unstable and highly volatile Forex trading, and rising prices of commodities, India’s GDP has already dipped by -23.9% in the last quarter. In the face of a crumbling economy, if proactive measures aren’t put in place timely, a country can slip into recession very easily.

     

    It is because of this reason that the Indian government quickly responded to the economic repercussions of the coronavirus. The effects of the COVID-19 pandemic took shape very quickly. Lakhs of restaurants represented by the NRAI (National Restaurants Association in India) were asked to immediately shut down all dine-in operations. This not only impacted the revenue of these restaurants but also of popular food delivery apps in India, such as Swiggy and Zomato. Restrictions on delivery vehicles and shortage of labor have resulted in delayed grocery deliveries and an overall decrease in GDP contribution of the food and agriculture industry. To contain a further downfall, here are the measures taken by the Indian government so far.

     

    Cheaper cash to assist bank operations

     

    The Indian government has taken several steps to encourage banks to approve lending and loan requests. Liquid Coverage Ratio was reduced from 100% to 80%. This way, banks won’t need to set aside high-quality assets at 100% capacity to facilitate cash flows for the next 30 days from any particular date. The government plans on increasing this ratio to 90% by October 1 and back to 100% only by April 1, 2021. Banks were also no longer required to set aside cash reserves for small business loans till July 31.

     

    The government also cut the policy lending rate by 75 basis points. The effective deposit rate was also cut by 115 basis points. This step was mainly taken from preventing lenders from keeping their cash in the bank and encouraging them to give out loans. All lenders were also allowed to freeze loan repayments for three months. The government also allowed any accumulated interest to be paid later without the loan being categorized as default. Providing such enhanced assistance to banking operations has helped stabilize the Indian economy and prevent it from falling rapidly.

     

    More money for sovereign bonds and rupee

     

    Before anything else, it is crucially important to give a boost to the Forex trading sector and provide them with all the right resources to make profitable trades and give the economy a solid boost. This is one of the strongest ways to help the INR fare better than other currencies. Learning about currency exchange rates is a great way to understand the benefits of this step. To keep bond yield low, the Reserve Bank of India (RBI) has been continually injecting liquidity into the economy. To assist monetary transmissions and Forex trading, the RBI injected one trillion rupees (one and three year cash).

     

    The government also allowed the Forex trading space to invite overseas investors to trade with sovereign bonds. This was done to gain access to global indexes, which would further assist in the record borrowing plan. Moreover, the Indian government had also enforced shorter Forex trading hours. The Mumbai market that worked from nine in the morning and closed at five in the evening was now allowed to function only from ten in the morning till two in the afternoon. The RBI also carried out two $2 billion swaps in order to inject more dollars into the economy. This gave a significant boost to the Forex trading space and enabled them to secure a little stability. For primary bond underwriters, a temporary liquidity tap was boosted. This was an approximately 257% increase from 2,800 crore rupees to 100,000 crore rupees.

     

    Enhanced assistance provided to consumers

     

    Apart from injecting liquidity to stabilize the Forex trading market, the Indian government also focused on providing enhanced assistance to the consumers. 80 million Indian families who cannot afford to pay for cooking gas have been provided that for free. Other than this, 5 kgs of wheat and 1 kg of pulses were provided to 800 million poor Indian families from the months of April to June. These were also the months when India was under a strict lockdown. The government paid 24% of the monthly wages of all Indians with a monthly income below 15,000 rupees. Moreover, over 87 million Indian farmers were paid 2,000 rupees under an economic relief program aimed at assisting them with their expenses. While these measures have worked fairly well, there’s still a long way to go before the Forex trading market stabilizes and the country’s economy begins to grow again.

     

     



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