Fight against COVID19:Is a financial emergency just round the corner?

The coronavirus menace is not only threatening the lives of people but is also having a disastrous effect on the economy of the World in general and India in particular. The situation is so dire that there is a chance that Government may be forced to declare a nationwide financial emergency. Read on to get an overview of the matter.

What is it?

A financial emergency can be declared under Article 360 of the Constitution of India.

Article 360 states that if the President is satisfied that a situation has arisen whereby the financial stability or the credit of India or any part thereof is threatened, the President may declare a state of financial emergency.

What happens during a Financial Emergency

During the period such Proclamation is in operation, the executive authority of the Union extends to the giving of directions to any State to observe such canons of financial propriety as may be specified in the directions, any such directions may also include:

It has provisions wherein salaries and allowances of all or any class of person serving a State or the Union can be reduced and the requirement that all Money Bills or other Financial Bills need to be reserved for the consideration of the President after they are passed by the legislature of the State.

A Proclamation issued under Article 360 will remain in force for two months unless before the expiry of the period it is approved by both the Houses of the Parliament. Once approved it remains in force till it is revoked by the President.

How serious is the situation?

Let us take a look at the state of the affairs at present:

• Foreign investors have already pulled out more than One lakh crore rupees from Indian market in only 15 trading sessions.
• Owing to the coronavirus spread, almost 80% of the Indian companies are asking their employees to work from home,
• Many companies have sent their employees on unpaid leaves or terminated them, this includes corporates like Go Air and Air India.
• India’s top 3 rating agencies Fitch, Moody’s and S&P have already reduced India’s GDP growth outlook to the lowest marks.
• The share markets of India, including the Bombay Stock Exchange (BSE) & National Stock Exchange (NSE) are plummeting at an alarming rate.
• US Dollar has the all-time highest value against Indian currency, at the time of writing this article at 15:29 hours on 23 March 2020, 1 USD is equal to INR 76.20.
• Several Private & government banks in India have very high NPA. The loan defaulters are unlikely to clear their dues soon (or even in near future).
• The Reserve Bank of India has already formed a war room with 90 people keeping an eye on the Indian economy. Such actions were never needed in the history of the RBI.
• The stored funds with the RBI, including the contingency funds & emergency funds have already depleted after the recent payout.
• Almost 80% of the major financial centres of the country are in lockdown. This covers large hubs like Bangalore, Mumbai, Pune, Delhi, Lucknow, Kanpur, Hyderabad, Jaipur, Chennai, Kolkata, Gurgaon, Noida, Baroda, Ahmedabad, Surat and Gandhinagar.
• Sectors like hotels, restaurants, night clubs, bars, airlines, BPO, tourism, entertainment & Bollywood, auto-mobile, aviation, hospitality, apparel, consumer durables and electronics, Poultry and Seafood, construction, transport and railway are worst hit by this epidemic and are reeling under heavy losses. This has also adversely impacted the revenues of several associated sectors like petrol, security service, road transport and many others whose revenues are directly & indirectly dependent on the above sectors.
• So far coronavirus has largely affected the financially solvent class who are able to survive the financial burdens and have multiple resources in terms of healthcare, work, financial savings and can afford to maintain self-quarantine and isolation to prevent the spread of the disease. The problem would become several times more complicated if it enters the economically weaker sections or the less educated and underprivileged strata. It would be much more difficult to quarantine the struggling population or to provide them with adequate health facilities. It would be nearly impossible to contain the spread of COVID19 once it enters this phase and even if somehow the authorities manage to control the spread, the huge cost of resources will definitely cripple the Indian economy.
• Corona cases in India at the time of writing this article have reached 425.

Then What?

At present it is extremely difficult to balance the two pronged attack that the Indian economy is facing.  The situation may worsen if the coronavirus infection reaches the fourth stage. We can only hope for the best and stay by the side of the authorities in all possible manner to prevent the worsening of the situation and to prevent the government from reaching a situation where the only option it will be left with is the imposition of Article 360. Let us take up the fight against coronavirus and pull all strings to preserve the financial integrity and in turn sovereignty of our nation. Please share this article to as many people as you can so that we can all stay together in this horrific situation.

Jai Hind

#Coronavirus#fightagainstCorona#SurgicalStrikeagainstCorona#Economy#IndianEconomy#Artcile360#FinancialEmergency