On the fiscal front, in mid-October the government unveiled
a modest USD 10 billion stimulus package to combat the
fallout from Covid-19, which, although expected to provide
a temporary boost to business sentiment, should have a
marginal impact on the overall recovery. In addition to
fiscal measures, state and discuss any other two measures
that may be taken to correct the situation.
Answers
Answer:
It would be dangerous for the government to wait any longer before announcing a large stimulus package. In my view, until a vaccine or a cure is found, we will have to handhold our economy by creating a stimulus of 10% of our gross domestic product (GDP).
The US announced a $2.2 trillion stimulus on a $20 trillion GDP base; Malaysia has mobilised close to 18% of its GDP. We need to spend more than $200 billion or Rs 15 lakh crore. It is essential that we start announcing measures that protect both lives and livelihood.
ADVERTISEMENT
Interest rates need to be reduced at least 200 basis points (2 percentage points) from current levels, with more measures to ensure that banks lend.
It is important that government spending continues, that agrarian homes are safeguarded, migrant workers are paid, and their employers and industry are looked after as well. After all, planning for zero revenue scenarios is a stress test that almost no business can withstand. Therefore, we need to ensure that all workers are paid Rs 5,000-6,000 per month by their employers during the lockdown period, and those employers are compensated for this through their lenders and further by the government.
For the post lockdown period, we need a complete debt restructuring package to ensure that all businesses can withstand this period of hit and restart healthy again. We need to do everything to stimulate spending both at an individual level and for their employers.
We also need to ensure that the state governments receive their fund allocations so that they do not create a credit crunch. The states are in the frontline of public health and other services. Cutting their funding would be disastrous.
ADVERTISEMENT
Answer:
The International Monetary Fund has already declared that the world is undergoing a global recession. This recession, unlike the global financial crisis of 2008, is not a financial markets recession but a personal one, not a supply side recession but a demand destruction. People are genuinely afraid of Covid-19, and this has wreaked havoc around the world.