Fiscal Stimulus in Times of Coronavirus

There was already  demand side shortfall before the Coronavirus led lockdown. This accentuated the situation and along with contraction in demand, the supply chain was also disrupted. This is reflected in 16 % contraction of  Industrial Production Output. Manufacturing has been worst hit.

The need to the hour is to bring supply chains to normalcy and to revive demand in the market. There is an argument that injecting liquidity in the system can help with revival of demand but in a situation where reverse migration is prevalent along with job loss at a massive scale any fiscal stimulus can bring demand to ‘pre Corona’ times, if at all  it can. However, the pre Corona demand itself was on the verge of contraction. Thus, we are at the inflection point where drastic steps must be taken to bring life to normalcy.

Relaxing the labour laws is one step in this direction. Though, this would take a toll on the labour force but a little contribution each of us can make to bring life to normalcy must be taken. Having said that the government must ensure that the labourers are not exploited in order to bring efficiency.

On account of massive reverse migration a large part of urban workforce has migrated to their hometown. As life is not going to come back to normalcy anytime soon, efforts must be made to address their concerns and instil confidence in them. They can be engaged by participating in village enterprises which can be financed by government.

The government has taken a step in the right direction by direct transfer of money into Jan Dhan Acccounts. The coverage can be better targeted by including MNREGA for the direct cash transfer scheme as it would lead to better coverage and the benefit will be more targeted towards the needy section.

In Urban areas MSME hold the key to generate employment and bring life back on track. The credit availability for them will help in strengthening in the time of crisis.

The battle with Corona cannot be won in a day. However, with persistent efforts against it one would be able to survive long enough to weaken the disease and strengthen our capacity to fight it.