A slipping economic growth in India was compounded with a rude jolt by the WHO declared pandemic which is threatening to wipe out many global economies. Covid-19’s sudden spike in March is wreaking havoc and in order to contain the fast spreading outbreak, India has decided to enter into a self-imposed near total lockdown of 21 days starting March 25, 2020. This has severely impacted the economy, as correctly forecasted by the Prime Minister, who chose the safety and health of Indians over anything else. The Union Finance Minister has announced several measures to tackle the situation on ground.
Fitch Lowers Growth Rate – Fitch Ratings recently released its Global Economic Outlook – March 2020 wherein it was estimated that India’s GDP growth shall remain broadly steady at 5.1% in the fiscal year 2020-2021 following growth of 5.0% in 2019-2020. The number of confirmed COVID-19 cases in India was low at the time of preparing the report, especially given the size of its population, but was picking up and the report assumes the number of people affected will keep rising in the coming weeks but that the outbreak will remain contained. The difficulties facing the Indian economy have been exacerbated by another bank failure (Yes Bank). Fragilities in the financial system will further undermine sentiment and domestic spending. The overall financial system remains burdened with weak balance sheets, which will limit any upside to credit and growth despite policymakers’ efforts in recent months to ease stresses.
Moody’s Severe Growth Impact – Moody’s Investors Service sharply cut India’s growth forecast for calendar 2020 to 2.5% from 5.3% estimated barely 10 days ago after the government ordered a nationwide lockdown to curb the spread of the coronavirus. The ratings company estimates a 5% growth for calendar 2019. According to the Global Macro Outlook 2020-21 released recently, the 21-day lockdown announced by Prime Minister Narendra Modi would result in a sharp loss in incomes and further weigh on domestic demand and the pace of recovery. Moody’s expects a sharp rebound in India’s growth in calendar 2021 to 5.8%. “A general lack of social safety nets, weak ability to provide adequate support to businesses and households, and inherent weaknesses in many major emerging market countries will amplify the effects of the coronavirus-induced shock,” Moody’s said. Moody’s said the lockdown will ‘dampen economic growth’ in India, already facing credit availability issues. “In India, credit flow to the economy already remains severely hampered because of severe liquidity constraints in the bank and non-bank financial sectors,” it said.
Personal Data Protection Bill – The Joint Parliamentary Committee’s (JPC) report on the Personal Data Protection Bill, 2019, will now be submitted in the second week of the Monsoon Session of Parliament. The chairperson of the committee had requested for an extension in the Lok Sabha recently, which was approved. At its constitution in December 2019, the report had to be submitted by the last week of the Budget Session 2020. The JPC had to meet to discuss the submissions that had been made to the committee, but all of that has been postponed because of the COVID-19 pandemic. Earlier, the JPC had invited comments from stakeholders on the provisions of the Bill, as reported by Asia Law Portal and pursuant to the same, the JPC received a number of submissions from various entities within the three week timeline. Most of these submissions have common causes of concern namely removing provisions relating to non-personal data, easing of restrictions on cross-border data transfer etc.
Government’s Economic Relief Package – The government announced a Rs 1.7 lakh crore relief package aimed at providing a safety net for those hit the hardest by the Covid-19 lockdown, along with insurance cover for frontline medical personnel. About 800 million people will get free cereals and cooking gas apart from cash through direct transfers for three months. The 21-day lockdown began on March 25. The Pradhan Mantri Garib Kalyan Yojana includes higher wages under the Mahatma Gandhi National Rural Employment Act (MGNREGA), Rs 1,000 ex-gratia payment to nearly 30 million poor senior citizens, widows and disabled as well as insurance coverage of as much as Rs 50 lakh each for about 2 million healthcare workers battling the disease. States have been asked to use the Building and Construction Workers Welfare Fund to provide relief to construction workers and the first installment of Rs 2,000 under the Pradhan Mantri Kisan Yojana will be frontloaded to reach 87 million farmers in April. The government said it will pay the entire provident fund contribution of those who earn less than Rs 15,000 per month in companies having less than 100 workers as they are at risk of losing their jobs. That amounts to 24% of basic pay, 12% from the employee and 12% from the employer. This will be paid by the government for 3 months. In addition, the Employees’ Provident Fund Regulations will be amended to include the coronavirus pandemic as grounds for allowing a non-refundable advance of 75% of the corpus or three months of wages, whichever is lower, from their accounts.
The Finance Minister had earlier announced a slew of measures for extension of statutory and regulatory compliances in view of the coronavirus pandemic spreading its wings and impacting the economy.