Blog : Economic Stimulus Packages A Lifeboat for the Drowning Economy

Covid-19 Pandemic which originated just a few months back has sent the world in turmoil. Apart from its effect on Human lives, the health infrastructure is overburdened in most of the countries and its massive impact on Global Economy is yet to be felt. Already the shocks of the impact have been observed in the Financial World since the World Health Organization declared it a pandemic on 11th March, 2020 as major economies have entered into a bearish market.

Since the beginning of March majority of the countries in the world have implemented partial or total lockdown and the culture of Work from Home is being promoted to control the spread of the virus. However the harsh reality is that work from home is a possibility only in a select few services. In Trading Sector, Manufacturing Sector, Personalized Services such as Transportation, Salons, etc. there cannot be any work from home. Even in certain developing countries not all the services have adequate facilities to work from home. Barring that in fields such as Tourism, Hotels & Restaurants there may not be any revenue for the near future. The jarring impact will be felt by the new entrants in businesses that do not have any adequate surplus to ride out the tide. All the existing business may also take 6-12 months to come into a normal business cycle.

The economic impact of the pandemic is not just limited to the Business & Profession. The Salaried Class may also face varied issued such as Redundancy, Pay Cuts, No Appraisal etc. at least till the employers have a normal cycle running. The International Monetary Fund did not exaggerate itself when it said the present economic recession is the worst recession since the Great Depression of 1929 . For the first time since the Great Depression both advanced economies and emerging market and developing economies are in recession. Many of us of the present generation may have heard the words Great Depression only recently and hence are not well acquainted with the horrors it holds for the Economic World.

To counteract this Governments across the World have leaped into action and announced and implemented economic rescue packages by way of unprecedented support to households, firms and financial markets. A comparative analysis of the relief packages by world leaders by way of % of GDP Gross Domestic Product of 2019 is presented for a better understanding - Japan 21.1 USA 13 Sweden 12 Germany 10.7 India 10 France 9.3 Spain 7.3 Italy 5.7 United Kingdom 5 China 3.8

As can be seen the world economies have outdid each other to shelter the citizens as well as the tumbling economy from the financial impact of the Pandemic. Major aspects of the Economic Stimulus packages are as under - 1 USA Small Business Loan Programs, Unemployment Insurance of additional 1600 per week and assistance in the form of tax rebates, tax credits and advances. 2 United Kingdom Corona virus Job retention scheme which provides grant of 80% of staff wage each moth to tune of 2500 Pounds per person if the companies kept the staff on payroll, Business interruption loan schemes to aid the business affected due to the Pandemic. 3 Italy As part of the package 10.3 Billion Euros is to boost unemployment benefits and to support self-employed persons. Moratorium on loan repayments of small & medium sized business until 30 September.

4 Canada Temporary top-up to salaries of low-income workers, Suspension of student loans till September, 2020, Interest free loans of up to 40,000 for small business. 5 India A collateral free loan scheme for MSME Medium, Small & Micro Enterprises was announced, Lower tax deduction rates to increase cash flow in the hands of non-salaried persons.

The main part of each & every economic stimulus packages is to the effect that businesses get loans to tide them over this rough business cycle and to see to it that no jobs are lost because of the pandemic. The main intention is to infuse cash into the economy so that consumer spending can be kept continuous and running. The impact of modern medicine and the fast implementation of economic stimulus packages may make all the difference in avoiding the gloomy periods such as The Great Depression.