Fiscal Stimulus Must Have to Succeed

It is expected that in today’s address to the nation, the Prime Minister would present the action plan and timeline which will provide fiscal stimulus to the economy for bring back the economy on the track. RBI is already taking actions through many monetary policy instruments to maintain the liquidity in the economy as well as a favourable exchange rate. SEBI is also taking actions to contain the volatility in the stock markets. It must be noted that current stock market crashes are nothing but the panic response to the crisis brought by the unexpected outbreak of Coronavirus pandemic from the corporate sector as well as the investors. But it would be a temporary phase. Once the economic activities start tending back towards the normal, the losses in stock market will be recovered in a month or two. Investors just need to remain invested (if invested in good stocks).

If the government is able to successfully address the problems faced by vulnerable sections of the society (the poor, daily wages earners and SMEs) and fix the GST confusion, it would be able to revive the consumption in the economy. If it is achieved upon in short run (by the end of July or August), rest of the things would automatically be taken care of. However, this would depend on our capability to counter Coronavirus as soon as possible. I personally expect that after one week, the patients’ statistics (chart) will starts flattening.

If everything goes on in this way, the economy will be back on track by the end of second quarter of next fiscal year. But also if it fails, a depression like situation is knocking on the door with unprecedented consequences.

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