Some thoughts on Economy during COVID 19 times

Govt has many things to do. On the one hand it has to effectively curtail the spread, limit the speed, and mitigate the severity of COVID 19 pandemic and on the other it has keep the economic train going which is at present devoid of fuel and so slowing and sputtering.Only the direction is correct because of the Driver.

The cynics always say only when India is pushed into a crisis or is it serindipity(!) ,only then it bounces back by taking up the much needed reforms. The year 1991 is a stark reminder of this.The 30 year itch is back to haunt us.

Now, First things first.

Health is wealth and Thiruvalluvar also says "பிணியின்மை செல்வம் விளைவின்பம் ஏமம் அணியென்ப நாட்டிவ் வைந்து."  

and so the citizens remaining without major diseases are an asset and an ornament for any country.

But this is a prerequisite or hygiene factor or given or default option, when it comes to running a nation in today's context.However, an emerging economy like India having made rapid strides in development in the last few years does not have a health infrastructure it can boast of nor does it have economic might to withstand the onslaught of a pandemic. This pandemic is a "Black Swan" event as described by Risk Management experts and so the response to it has to be a blend of conventional wisdom and unconventional thinking.

This is easier said than done because in hindsight we have 20/20 vision and when faced with such a calamitous situation there will be many redherrings and straw man fallacies which can fail you. Sometimes Cobra effect or Cobra paradox can set in motion with unintended consequences. Nevertheless we should pursue proactive policies which can be tweaked as we go along inorder to rejuvenate its people and reinvigorate the economy.

When it comes to Economy, cash flow i.e liquidity is the major problem in times of lockdowns due to emergencies and so "Pump Priming" through infrastructure projects, is the first hand remedy. Lack of earnings is only a secondary problem.

With the above caveats let me give my top of the mind tips to Govt in terms of tackling the economic crises:
1)Provide a Senior Citizen Health insurance based on the IT paid by that person when he was hale and healthy and earning.If a Senior citizen had paid IT for 15 years continuously, then the Govt. should take care of his ailments in his sunset years by paying the health premiums on his behalf.

2)For augmenting govt. revenues Govt should upwardly revise royalty charged on Mining Cos and Oil exploration cos.

3)All user charges incl. EB tariffs collected by Govts. etc. should be linked to inflation indexation in future.

4)All pending Govt. liabilities both at the Central and State levels,whether provided for or not, should be cleared forthwith by using RBI Ways and Means Advances as a one time relief ,to all the suppliers. Many Power producers to whom State Discoms or State Govts. have not paid, in some cases even for 3/4 years now, will get a huge cash inflow which will again flow back to oil the wheels of the economy. Even if there is a dispute hold back 10% of the dues or take a BG and pay the amount.

5)Govt. can consider pledging the shares of its PSUs ,Banks, Navratnas, State Ratnas incl. that of Air India with ADB/IMF or BRICS bank and raise the resources temporarily.

6) Govt should also announce a National Pandemic Gold deposit scheme where citizens must be encouraged to deposit their Gold-similar to Defence scheme launched during Pak war of 1965- to mobilise and put the idle assets of the people to constructive use.

Govt. should also try to be careful in not allowing fiscal deficit to expand exceeding 1 to 1.5% of GDP that too beyond 2 years and should come with a roadmap well calibrated to rein in the fiscal deficit to retain international investor confidence. Also should consider its adverse impact on inflation which should not morph into poor man's tax curse. Govt has a healthy RBI B/S, huge FE reserves, Foodgrain reserves and low Current Account deficits to back up its loosen its purse strings temporarily to inject liquidity into the economy.