ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Structuring Bailouts during Covid-19

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With the Covid-19 pandemic, econo­mic stimulus packages are in vogue, more like they are the need of the hour. It comes as no surprise that the opening up of economies in the post-lockdown era would take several years of resilience to recoup, restore and restitute the cost of these stimulus packages to the benefits of society. While most of these new pandemic relief funds are to bolster a tapped-out small- and medium-sized enterprise segment and further facilitate clinical and medicinal facilities deluged by infected patients, in some parts, these are also being used for keeping afloat the unemployed citizens, providing free foodgrains and cooking gas and keeping up with other similar domestic market demands.

India with its insidious problems of the poverty-ridden and vulnerable population suffering from multiple economic and social deprivations, particularly the migrant workers, who are majorly engaged in informal and unorga­nised sectors (employing a predominant percent of workforce), along with the health sector marred by a myriad of exigencies—seeks to attenuate the effect of the lockdown on its economy. With a lockdown of more than 30 days, the economy has come to a standstill, exacerbated by the already existing public debt piling up. The soaring government spending and disrupted economic acti­vities may not revive completely any time soon in the near future to gain momentum in full swing. The loss of revenue on account of the lockdown is likely to take the combined fiscal deficit of the central and state governments for this fiscal year well beyond 10% of the gross domestic product (GDP), as against the budgeted estimate of 6.5%. At 70%, India’s debt-to-GDP ratio is certain to increase, as debt rises and nominal GDP contracts. This leads to an obvious question of how to finance the economy in order to keep it sustainably afloat wherein authorities may attempt to dither and incompleteness shall be rendered by any monetary union without fiscal policy union or a word of caution.

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Updated On : 24th Dec, 2020

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