An Economic Domino is coming, time for RBI to do something!

The economic consequences of the #coronavirus situation are perhaps not very well appreciated. It’s a pity that @RBI has missed the monster in the room. Even if the shutdown is only a few weeks, it will have a domino impact on all sections of the society

Indian economy with all its gig and informal nature, is not a work from home economy. Daily wagers, hired labour or contract employees do not get paid for not showing up! s cities shut down, those at the bottom of the pyramid will bear the full brunt of it.

Govt investment had hit fiscal roadblock, private investment was already weak and trade will see strong headwinds in the near term. Now consumption is hit with the social distancing required to check the virus. In India, the first impact is on the heavy-spending consumers. This leads to a very tough decision for the govts – central and states

What can be shutdown without too much economic impact too soon?

There’s obviously a cost of staying open. But the costs of shutting down Indian cities are also humongous and currently not thought out. The worst impact of the #coronavirus situation will be on the same sectors which were impacted after Demonetization.

Small businesses could have done with some helping hand by RBI but seems now it’s three weeks away, if at all. Govt spending to push aggregate demand immediately won’t be effective if anyway no business activity can be conducted. Yet, people who don’t get paid will need money in hand. Liquidity, easy and cheap access to credit needed now. Perhaps direct transfers also at some point. 

The economic impact of #coronavirus will outlast the actual outbreak period. Tough times ahead

This was originally published here

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