{"id":60181,"date":"2020-05-09T21:14:39","date_gmt":"2020-05-09T15:44:39","guid":{"rendered":"https:\/\/blog.forumias.com\/?page_id=60181"},"modified":"2020-05-09T21:14:39","modified_gmt":"2020-05-09T15:44:39","slug":"economic-consequence-of-covid-19","status":"publish","type":"page","link":"https:\/\/forumias.com\/blog\/economic-consequence-of-covid-19\/","title":{"rendered":"Economic Consequence\u00a0Of\u00a0Covid-19\u00a0"},"content":{"rendered":"<h3 class=\"note1\"><span data-contrast=\"auto\">Economic Consequence\u00a0<\/span><span data-contrast=\"auto\">Of<\/span><span data-contrast=\"auto\">\u00a0Covid-19<\/span><span data-ccp-props=\"{&quot;134233117&quot;:true,&quot;134233118&quot;:true,&quot;201341983&quot;:0,&quot;335551550&quot;:1,&quot;335551620&quot;:1,&quot;335559739&quot;:160,&quot;335559740&quot;:276}\">\u00a0<\/span><\/h3>\n<p><b><span data-contrast=\"auto\">Source:\u00a0<\/span><\/b><a href=\"https:\/\/indianexpress.com\/article\/opinion\/columns\/india-economy-npa-covid-19-arvind-subramanian-josh-felman-6400664\/\"><b><span data-contrast=\"none\">The Indian Express<\/span><\/b><\/a><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<p><em><b>Syllabus: GS 3- Issues related to Indian Economy<\/b>\u00a0<\/em><\/p>\n<p><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><b><span data-contrast=\"auto\">Context:\u00a0<\/span><\/b><span data-contrast=\"auto\">The\u00a0<\/span><span data-contrast=\"auto\">Covid<\/span><span data-contrast=\"auto\">\u00a0crisis has remained serious for the health situation as well as the economy. Almost all the countries are living under the lockdown. The next important step will be of exit plans from lockdown in which the task of reviving economy will be of paramount importance.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<p><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><b><span data-contrast=\"auto\">Problems in the Indian economy before CoVID-19:<\/span><\/b><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<ul>\n<li data-leveltext=\"\uf0b7\" data-font=\"Symbol\" data-listid=\"18\" aria-setsize=\"-1\" data-aria-posinset=\"1\" data-aria-level=\"1\"><span data-contrast=\"auto\">From 2014, the banking sector and infrastructure firms are under financial stress defined in terms of Twin Balance Sheet (TBS) challenge.\u00a0<\/span><span data-ccp-props=\"{&quot;134233279&quot;:true,&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<li data-leveltext=\"\uf0b7\" data-font=\"Symbol\" data-listid=\"18\" aria-setsize=\"-1\" data-aria-posinset=\"2\" data-aria-level=\"1\"><span data-contrast=\"auto\">By 2019, it raised the number of stressed balance sheets to four including NBFC and real estate sectors.<\/span><span data-ccp-props=\"{&quot;134233279&quot;:true,&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<\/ul>\n<p><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><b><span data-contrast=\"auto\">Effects of\u00a0<\/span><\/b><b><span data-contrast=\"auto\">Covid<\/span><\/b><b><span data-contrast=\"auto\">\u00a0Lockdown on economy:<\/span><\/b><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<ul>\n<li data-leveltext=\"\uf0b7\" data-font=\"Symbol\" data-listid=\"19\" aria-setsize=\"-1\" data-aria-posinset=\"1\" data-aria-level=\"1\"><b><span data-contrast=\"auto\">Unsold Goods:\u00a0<\/span><\/b><span data-contrast=\"auto\">The goods of firms of all sizes and sectors remained unsold.<\/span><span data-ccp-props=\"{&quot;134233279&quot;:true,&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<li data-leveltext=\"\uf0b7\" data-font=\"Symbol\" data-listid=\"19\" aria-setsize=\"-1\" data-aria-posinset=\"2\" data-aria-level=\"1\"><b><span data-contrast=\"auto\">No earning:\u00a0<\/span><\/b><span data-contrast=\"auto\">As many families remains unemployed as firms are closed.<\/span><span data-ccp-props=\"{&quot;134233279&quot;:true,&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<li data-leveltext=\"\uf0b7\" data-font=\"Symbol\" data-listid=\"19\" aria-setsize=\"-1\" data-aria-posinset=\"3\" data-aria-level=\"1\"><b><span data-contrast=\"auto\">Low Recovery of Loans:\u00a0<\/span><\/b><span data-contrast=\"auto\">The Financial institutions are unable to collect their loans.<\/span><span data-ccp-props=\"{&quot;134233279&quot;:true,&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<li data-leveltext=\"\uf0b7\" data-font=\"Symbol\" data-listid=\"19\" aria-setsize=\"-1\" data-aria-posinset=\"4\" data-aria-level=\"1\"><b><span data-contrast=\"auto\">Reduction in tax revenues:\u00a0<\/span><\/b><span data-contrast=\"auto\">The government tax revenue has reduced as most sectors remains closed.<\/span><span data-ccp-props=\"{&quot;134233279&quot;:true,&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<\/ul>\n<p><span data-contrast=\"auto\">As per Reports, around 1\/3<\/span><span data-contrast=\"auto\">rd<\/span><span data-contrast=\"auto\">\u00a0of industrial and service firms have applied for moratoria on their bank loans and if only a quarter of these deferred loans eventually go bad, then the non-performing assets (NPAs) would increase by Rs 5 lakh crore.\u00a0<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<p><b><span data-contrast=\"auto\">Difference in government situation in Global Financial Crisis of 2008-09 and economic crisis due to Corona:<\/span><\/b><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<ul>\n<li data-leveltext=\"\uf0b7\" data-font=\"Symbol\" data-listid=\"20\" aria-setsize=\"-1\" data-aria-posinset=\"1\" data-aria-level=\"1\"><b><span data-contrast=\"auto\">Global Financial Crisis of 2008-09:<\/span><\/b><span data-contrast=\"auto\">\u00a0The government had a relatively strong balance sheet: Deficits and the consolidated debt-GDP ratio were low. So, the government could recapitalize the PSU banks because of such fiscal space.<\/span><span data-ccp-props=\"{&quot;134233279&quot;:true,&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<li data-leveltext=\"\uf0b7\" data-font=\"Symbol\" data-listid=\"20\" aria-setsize=\"-1\" data-aria-posinset=\"2\" data-aria-level=\"1\"><b><span data-contrast=\"auto\">Corona crisis:\u00a0<\/span><\/b><span data-contrast=\"auto\">The Central and state government deficits and debts will increase dramatically as revenues will be reduced and expenditures will increase. As a result, the government will put higher taxes and more arrears on the corporate and household sectors.<\/span><span data-ccp-props=\"{&quot;134233279&quot;:true,&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<\/ul>\n<p><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><b><span data-contrast=\"auto\">How to minimize losses for sectors during Corona crisis?<\/span><\/b><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<ol>\n<li data-leveltext=\"%1.\" data-font=\"Book Antiqua\" data-listid=\"21\" aria-setsize=\"-1\" data-aria-posinset=\"1\" data-aria-level=\"1\"><b><span data-contrast=\"auto\">From perspective of Firms:<\/span><\/b><span data-ccp-props=\"{&quot;134233279&quot;:true,&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<\/ol>\n<ul>\n<li data-leveltext=\"\uf0b7\" data-font=\"Symbol\" data-listid=\"21\" aria-setsize=\"-1\" data-aria-posinset=\"1\" data-aria-level=\"2\"><b><span data-contrast=\"auto\">Preventing them from bankruptcies:\u00a0<\/span><\/b><span data-contrast=\"auto\">\u00a0The government might need to create a guarantee fund to support lending to help firms.\u00a0<\/span><span data-ccp-props=\"{&quot;134233279&quot;:true,&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<li data-leveltext=\"\uf0b7\" data-font=\"Symbol\" data-listid=\"21\" aria-setsize=\"-1\" data-aria-posinset=\"2\" data-aria-level=\"2\"><b><span data-contrast=\"auto\">To resolve defaults:\u00a0<\/span><\/b><span data-contrast=\"auto\">Quick resolution of default by firms is important as stressed firm condition will worsen over time. They have poor cash flows and can\u2019t take loans from banks. So, they don\u2019t have enough money to fund their operations and with time the firms\u2019 market value deteriorates.<\/span><span data-ccp-props=\"{&quot;134233279&quot;:true,&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<\/ul>\n<ol>\n<li data-leveltext=\"%1.\" data-font=\"Book Antiqua\" data-listid=\"21\" aria-setsize=\"-1\" data-aria-posinset=\"2\" data-aria-level=\"1\"><b><span data-contrast=\"auto\">From perspective of Banks:<\/span><\/b><span data-ccp-props=\"{&quot;134233279&quot;:true,&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<\/ol>\n<ul>\n<li data-leveltext=\"\uf0b7\" data-font=\"Symbol\" data-listid=\"22\" aria-setsize=\"-1\" data-aria-posinset=\"1\" data-aria-level=\"2\"><b><span data-contrast=\"auto\">Recovery rate:\u00a0<\/span><\/b><span data-contrast=\"auto\">It is the degree to which the banks can recover on NPA loans and the only way to maximize the recovery rate is to sort out the bad loans speedily.<\/span><span data-ccp-props=\"{&quot;134233279&quot;:true,&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<li data-leveltext=\"\uf0b7\" data-font=\"Symbol\" data-listid=\"22\" aria-setsize=\"-1\" data-aria-posinset=\"2\" data-aria-level=\"2\"><b><span data-contrast=\"auto\">Urgent Actions:\u00a0<\/span><\/b><span data-contrast=\"auto\">As no sector is in a strong position to rescue the banks, the costs cannot be spread, they must be reduced and any delays in handling NPAs will erode the value of assets.<\/span><span data-ccp-props=\"{&quot;134233279&quot;:true,&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<\/ul>\n<p><b><span data-contrast=\"auto\">Way Forward<\/span><\/b><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">A new decisive and quick approach is needed for immediate addressing of problems created by the crisis.<\/span><\/p>\n<p><a href=\"http:\/\/blog.forumias.com\/9-pm-daily-brief-may-9th-2020\/\">Link to 9pm brief<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Economic Consequence\u00a0Of\u00a0Covid-19\u00a0 Source:\u00a0The Indian Express\u00a0 Syllabus: GS 3- Issues related to Indian Economy\u00a0 \u00a0Context:\u00a0The\u00a0Covid\u00a0crisis has remained serious for the health situation as well as the economy. Almost all the countries are living under the lockdown. The next important step will be of exit plans from lockdown in which the task of reviving economy will be&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/economic-consequence-of-covid-19\/\">Continue reading <span class=\"screen-reader-text\">Economic Consequence\u00a0Of\u00a0Covid-19\u00a0<\/span><\/a><\/p>\n","protected":false},"author":10300,"featured_media":0,"parent":0,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"class_list":["post-60181","page","type-page","status-publish","hentry","entry"],"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/pages\/60181","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/pages"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/page"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10300"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=60181"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/pages\/60181\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=60181"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}