Speaking of the federal government’s plans, Sanjeev Sanyal mentioned the federal government is clearly conscious of the disruption within the financial system and it has taken a distinct method to what another international locations have executed.
“First, we prioritized the health emergency over the economic emergency. If we hadn’t kept the health sector on priority, given the size of our population and the density of the cities in India, it would have gone out of control and then nothing would have mattered.”
On the variety of job losses that the nation is observing in view of the halted economic actions due to the coronavirus pandemic, Sanjeev Sanyal mentioned, “We focused on providing some sort of a cushion to the system whether it’s the reserve bank repeatedly coming out with liquidity or the government physically out there to distribute ration, putting money into people’s accounts through direct transfers and so on. It’s just a cushion. Over time, several packages would be announced and will be slowly ramped up. Through the opening and then rebuilding which is the next phase.”
“We will ramp things up step by step,” Sanjeev Sanyal mentioned.
Asserting that the federal government understands these are laborious occasions and the preliminary steps might not resolve the issues the nation is dealing with, Sanjeev Sanyal mentioned that the federal government is keen to do much more however in a calibrated style. “At every step we have to not simply announce a great package, we have to make it work on the ground. A lot will be done in stages and it will happen a lot sooner than later,” the principal economic adviser mentioned.
On the businesses’ strategies of eliminating the Goods and Services Tax (GST) for some time, Sanjeev Sanyal mentioned whereas it could assist one group, it’s not apparent it is going to assist the opposite ones just like the hospitality trade.
On the stimulation of demand, the principal economic adviser mentioned, “India has a significant monetary space. We also have more fiscal space and we will use it. Unlike many developed countries with high GDP ratios, our GDP ratio is much more reasonable. We have to take into account the constraints.”
“The job losses will not only happen in large scale in the MSMEs and the unorganized sector, it would also be difficult to track where those losses are. We take the issue of stimulating demand and made sure there is adequate functioning of the monetary transmission. Both for payments as well as to stop something quite dangerous which is a cascade of defrauds. When that begins to happen the financial sector jams up and it can be very difficult to revive these things,” Sanjeev Sanyal mentioned.
Elaborating on the MSMEs, Sanjeev Sanyal mentioned we stay in an ecosystem the place everybody depends upon everyone else and one of many problems with financial transmissions has been the issue of getting credit score via to the MSME sector.
“Typically, there is a rush by these financial systems to safety in which case, even viable MSMEs find it very difficult to get credit. You have to provide some extra care to the MSME sector. They employ a large number of people. Cash flow has to be maintained,” he mentioned.
“The wider problem is that we have a slowdown and one of the problems you will see with this migration is that in the urban areas, if and when the growth comes back, they are going to face skilled and unskilled labour. We will have to pay attention to this. But once we are past the initial phase of opening up, we’ll have to revive growths. Rebuild our economy into a new world we are emerging into,” Sanjeev Sanyal mentioned.