OBJECTIVE The Corona virus pandemic is posing a severe health and humanitarian crisis across the globe. It has also brought an unexpected economic shock to the global economy and initiated a crisis which would burden nations for years to come. In this Webinar, we shall look at various policy measures being taken in response to the crisis at the national and international levels. The webinar will also highlight possible fiscal measures that can be adopted to respond to the economic crisis caused by COVID-19.

1. COVID – 19 : Economic
Impact
CA Divakar Vijayasarathy

2. Research
Credits
Thirumal V
CA Jugal N Gala
CA Sundara Rajan T K

3. Legends used in the Presentation
ETF Exchange traded funds
FTA Free Trade Agreements
GDP Gross Domestic Product
IFC International Finance Corporation
IMF International Monetary Fund
OECD Organisation for Economic Cooperation and Development
PBOC People's Bank of China
RCEP Regional Comprehensive Economic Plan
VAT Value Added Tax

4. Presentation Schema
Introduction OECD Measures
Measures Taken
by Various
Countries
Measures by
World
Organisations
Statistics
India’s Position
Before COVID-19
India’s Economic
Revival Measures
in Past 6 months
Reserves and
Currency
Statistics
Inference Impact & Caveats
Path to Recovery Marshall Plan
Measures by
Indian States
Top Trade
Partners
China’s Crucial
Role
Observations &
Learnings
India’s
Leadership Role
Conclusion and
Way Forward

5. Introduction
The ongoing Coronavirus 2019 (COVID-19) pandemic is causing a
severe health and humanitarian crisis across the world.
The unprecedented pandemic has also brought unexpected
economic and financial shocks to the global economy
It has set in motion a major economic crisis that will burden
countries for years to come
Such a situation requires quick and appropriate response in terms
of policy measures from the Governments

6. OECD Measures
The Organisation for Economic Cooperation and Development (OECD) has
indicated potential emergency tax policy measures to assist policymakers.
Temporarily provide more generous welfare payments and
income support
Waiving or deferring employer and self-employed social security
contributions, as well as payroll related taxes
Providing tax concessions for workers in health and other
emergency-related sectors
Deferring payments of VAT, customs or excise duties for
imported items
Speeding up refunds of excess input VAT, with measures to limit
fraud risks
Simplifying procedures for claiming relief from VAT on bad debts
Adjusting the required advance payments on the basis of a
revised expected tax liability
Deferring or waiving taxes that are levied on a tax base that
does not vary with the immediate economic cycle, e.g. recurrent
property taxes
Increasing the generosity of loss carry-forward provisions
Preparing for recovery including through tax policy
Extension of Deadlines
Deferral of Tax Dues
Suspending Penalties and Interest
Debt Payment Plans
Suspending Debt Recovery
Quicker Refunds
Provide Tax Certainty
Relaxing Tax Audit Policies
Enhances Taxpayer Services
Clear Communication

7. Measures Taken by Various
Countries

8. Country Demand-side measures Supply-side measures
Amount
(USD)
United States
Stimulus package
$ 1 trillion
$1000 direct payments to adults
• $50 billion bailouts for airlines
• >$500 billion loans to businesses
France
• Substantial social-security tax
cuts
• Unemployment benefits for people
forced to work part time
• Guaranteed bank loans
• A fund to help shopkeepers and the
self-employed
$376 billion
Germany
Lending of $610 billion by state-run bank
$632 billion
$21.6 billion response fund
United Kingdom £20 billion in other aid
• £330 billion in loans
• A business rates holiday, and grants for
retailers and pubs
• Airline bailout in consideration
$410 billion
Euro Zone
European Commercial Bank will buy
government and company debt across the
eurozone (including Greece and Italy)
$820 billion
Canada
• Central bank reduced reserve allowing
banks to lend an additional $214 billion
• Govt $7.1 billion in loans to businesses
by the Government
$220 billion

9. Country Demand-side measures Supply-side measures
Amount
(USD)
UAE
5 billion dirhams of water & electricity
subsidies for citizens & industries
Initiatives to boost SME. Has pledged
100 billion dirham
$27.1 billion
Hong Kong
• $1200 cash subsidy to all adult
permanent residents
• Paying one month's rent for people
living in public housing
• Cutting payroll, income, property,
and business taxes
• Extra month’s pension payments
Low-interest, government-guaranteed
loans for businesses
$30 billion
New Zealand
• 5 billion New Zealand dollars will be
allocated for wage subsidies
• 2.8 billion New Zealand dollars for
income support
• 2.8 billion New Zealand dollars in
business tax relief
• 600 million New Zealand dollars has
been allocated for the airline industry
$7.3 billion
Indonesia
Second stimulus package of 120 trillion rupiah
$8.9 billion
• 10.3 trillion rupiah rescue package to
support consumer spending and
tourism
• workers with income below 200
million rupiah would be exempted
from paying taxes – 6 months
• 22.9 trillion rupiah loan disbursement
to businesses
• 30% corporate tax discount – 6
months
South Korea Covering Healthcare costs Support to SMEs $13.7 billion

10. Country Demand-side measures Supply-side measures
Amount
(USD)
Japan
• Loans to small businesses ($4.6 billion and $35
billion package)
• Central bank measures
• Doubling rate of purchase of exchange
traded funds
• increased purchases of corporate bonds
and commercial paper
• 0% Interest loans
$40 billion
Singapore
SGD 5.6 billion to help
businesses and families
through the economic
downturn
SGD 8.3 billion has been set aside over three
years to spur enterprises and the economy to
transform and grow
$9.59 billion
Australia
17.6 billion Australian dollars stimulus package
2.4 billion to boost health services
$11.4 billion
China
People's Bank of China (PBOC), has implemented several policy measures
$330 billion
• Expanded reverse repo operations by $174 Bn
• added another $73 billion
• cut the one-year medium-term lending facility
rate
• cutting its one-year and five-year prime rates
• lowered bank reserve requirements
$4 billion “Stabilisation and Support Package” to
Provide job and cash-flow support to help firms

11. Measures by World Organisations
International Monetary Fund (IMF)
IMF said it, “stands ready to mobilize its $1 trillion lending capacity to help our membership”
World Bank
• On March 3 World Bank announced a $12 billion response package,
o which included $6 billion in financing by the World Bank to strengthen health systems
and disease surveillance and
o $6 billion by International Finance Corporation (IFC) to help provide a lifeline for micro,
small and medium sized enterprises, which are more vulnerable to economic shocks
• On March 17, The World Bank and IFC’s Boards of Directors approved an increased $14
billion package
o The IFC will increase its financial availability by another $2 billion to support private
companies and their employees hurt by the economic downturn caused by the spread
of COVID-19

12. Statistics

13. India’s Position Before COVID-19
India was already facing a economic slowdown prior to the outbreak
with stagnation of growth which is reflected in various parameters
Trade and Taxes [Growth %]GDP Growth rate [%]
Source: MOSPI
Source: RBI, MoF

14. Contd.
Consumption and Investment Indicators [Growth %]
IIP - Index of Industrial Production
Electricity Generation [Growth %]
Source: Central Electricity Authority
Source: MOSPI

15. India’s Economic Revival Measures in
Past 6 months
Rs 70,000-crore capital infusion into public sector banks
Corporate tax rate cuts
Special tax rates for manufacturing companies
Removing Angel tax for Start-ups
Roll back of high surcharge to retain Foreign Portfolio Investors (FPIs)
Government to purchase new vehicles and replace old ones – To boost Auto Sector
National Infrastructure Pipeline (NIP) – Rs 102 lakh crore projects to develop infrastructure
Indian government introduced several supply side measures during the last 6 months. However, it is
high time that the Govt introduces demand-side measures especially considering COVID-19 crisis.

16. Reserves and Currency Statistics
Country
Ratios
Broad Money /
Reserves
Reserves /
Broad Money
Singapore 1.51 0.66
Hong Kong 3.29 0.30
Indonesia 3.31 0.30
United Arab Emirates 3.58 0.28
India 5.04 0.20
South Korea 6.00 0.17
China 8.23 0.12
Japan 9.91 0.10
New Zealand 11.84 0.08
United Kingdom 23.62 0.04
Australia 27.50 0.04
Source: World Bank
(Data pertains to 2018)
India as on 28 Feb 2020
₹ in crores Broad Money /
Reserves
Reserves /
Broad MoneyBroad Money Reserves
1,64,64,808.00 34,75,030.00 4.74 0.21
Source: RBI
Broad Money is a measure of money, or money
supply, in a national economy including both highly
liquid “narrow money” and less liquid forms
Reserves comprise holdings of monetary gold,
special drawing rights, reserves of IMF members
held by the IMF, and holdings of foreign exchange
under the control of monetary authorities.
Broad money to total reserve signifies the extent
to which the reserves have been leveraged

17. Reserves and Currency Statistics
Country Broad Money (USD) per Capita
Hong Kong 1,86,724.56
Japan 99,529.59
Singapore 78,458.18
United Kingdom 61,383.09
Australia 58,869.15
South Korea 46,857.19
New Zealand 42,403.16
United Arab Emirates 34,158.99
China 18,681.84
Indonesia 1,513.13
India 1,507.36
Source: World Bank
(Data pertains to 2018)

18. Inference
Compared to countries such as China and Japan,
India has room to leverage and inject more
money into the economy
Therefore, India can opt for expansionary policies
to boost the economy and to ease the impact of
COVID-19 pandemic
The side effects of Inflation and Fiscal deficit
should be ignored in the short and medium run to
ensure quick revival

19. Impact & Caveats
Higher tax rates on the super
rich in the future to mop up
more funds
From the international tax
perspective, consensus on
digital tax and other issues
could be delayed
Governments of many
countries would turn
protectionist
With an already weakening
world trade scenario, trade
between countries will slow
down further
Increase in trade tensions
between major economies
are likely
Higher Rate of defaults in
debts of businesses

20. Path to Recovery

21. Marshall Plan
Given the gravity of COVID-19 crisis, India also requires a “Marshall Plan” with a 2-3
year horizon for complete economic recovery. The same has been voiced by many
experts.
The Marshall Plan, also known as the European Recovery Program, was a U.S.
program providing aid to Western Europe following the devastation of World War II.
It was enacted in 1948 and provided more than $15 billion to help finance rebuilding
efforts on the continent.
The brainchild of U.S. Secretary of State George C. Marshall, for whom it was named, it
was crafted as a four-year plan to reconstruct cities, industries and infrastructure heavily
damaged during the war and to remove trade barriers between European neighbors –
as well as foster commerce between those countries and the United States.

22. Measures by Indian States
Tamil Nadu
• ₹1000 payment per ration card
• ₹2000 to construction workers and labourers
• One month salary as incentive to Healthcare workers
Kerala
• ₹20,000 crore response package, includes:
• Early pension payments
• ₹2,000 crores for consumers loans
West Bengal • Free Food Rations for 6 months
Uttar Pradesh
• ₹1000 payment to construction workers, self employed small shop owners
• Free one month stock of food grains to families through Public Distribution
Systems
Delhi 5,000 rupees early pension and larger rations in food subsidies
The above steps are in the right direction. However, considering
the magnitude of the COVID-19 situation, the quantum of relief
measures is to be increased substantially.

23. Top Trade Partners
Import Export
China
United States
United Ara Emirates
Saudi Arabia
Iraq
United States
United Arab Emirates
China
Hong Kong
Singapore
India’s economic recovery will also be dependent on recovery
of top trade partners both in terms of imports and exports.
The situation in China has improved in terms of the pandemic in the last
week. However, the path to economic recovery is not in sight.
This poses a serious challenge to the Indian Economy
In other countries, the magnitude of the impact of COVID-19 is still uncertain.
The lockdown has impacted the economic activity in all these countries

24. China’s Crucial Role
Number of New Cases on Each Date
China’s economic recovery from the pandemic is crucial to the Global
economy as it plays a major role in global trade by nearly contributing 15% of
the Global GDP and playing a major part in the global value chain.

25. Observations & Learnings
• It is evident from the COVID-19 situation that having a Global Value Chain for critical products
can adversely impact production and supply in a global crisis situation
• Therefore, production process of critical products should be entirely established domestically
The case of Indian pharmaceutical industry
• The Indian pharmaceutical industry is the 3rd largest in the world by volume.
• However, despite this achievement, India is significantly dependent on import of basic raw materials,
viz., Bulk Drugs that are used to produce medicines.
• In some specific bulk drugs the import dependence is 80 to 100%.
• Continuous supply of drugs is necessary to ensure delivery of affordable healthcare to the citizens. Any
disruption in supplies can have significant adverse impact on Drug Security, which is also linked to the
overall economy of the country. Self-sufficiency in manufacturing of bulk drugs is critical.
On 21 March, 2020, following the impact of COVID-19 on pharma industry due to
shortage of raw material, the government approved the following schemes to
promote the production of bulk drugs in India:
 Promotion of 3 Mega Bulk Drug Parks
 Production Linked Incentive Scheme for Bulk drug Manufacturers
However, these are Policy measures which will yield results only in the long run.

26. Observations & Learnings
Considering the role Air India has played in the evacuation of citizens, strategic
importance is to be affixed to the same and its disinvestment is to be
reconsidered
US, New Zealand and other countries are keen on capturing the domestic dairy
markets through FTAs which should be resisted by the Govt
The Govt should ensure that in any future FTAs including RCEP and with US,
essential industries are not compromised.
Free Trade Agreements (FTAs) covering basic and essential goods are
detrimental to the development of domestic players
Domestic manufacturing capability in critical industries (essential and strategically
important) should be strengthened and protected against external competition

27. India’s Leadership Role
The South Asian Association for Regional Cooperation (SAARC) COVID-19 Emergency
Fund was announced on 15 March when Hounourable Prime Minister Narendra Modi
addressed a conference of SAARC Leaders
India on its part had announced it would contribute $10 million as an initial contribution
The fund has supplied various medical supplies, testing equipment and sanitisers among
other items to Maldives, Sri Lanka, Afghanistan, Nepal, Bangladesh and Sri Lanka
India has also contributed to Iran and Italy by supplying relief materials, testing kits etc.
COVID-19 has provided an opportunity to India to establish
itself as global leader. The government has also made the
right moves in this direction with the following measures:
Post COVID-19, the Government should continue these steps by helping in the
economic recovery of developing countries especially in the African and Asian region to
control the influence of China

28. Conclusion and Way Forward
The sheer magnitude of the current COVID-19 situation has created an unprecedented
uncertainty in the global economy
Till date India has managed to control the damage due to COVID-19. However, the
path to economic recovery is steep given its already existing lower growth situation
Well before the outbreak, the global economy exhibited a number of underlying
vulnerabilities, which is now getting exposed further.
On the economic front, there has to be a globally coordinated action plan to minimise
the economic damage.

29. Thank You!
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