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Targeted Economic Policies - India



The COVID-19 pandemic is expected to cause severe impact on the economy than the 2007-2008 recession. Certain steps, maybe in the form of policies have to be taken by the Government. Extending the deadline the financial year for 2019-2020 might also be a good idea as it will act as a cushion for the companies. Several countries have already taken this decision.



For the rest of this article I will explain the remaining possible targeted policies with India as an example.

India extended its Financial Year 2019-2020 deadline from April 31, 2020, to June 30,2020. But extending the deadline alone will not create a major change. Certain more steps have to be taken. Since, already India has been fighting with stagflation for nearly a year it will be very difficult for the Government to take any policies without further investigation.



Stimulus packages were announced by the Indian government amounting to nearly rupees 20 lakh crores, but unfortunately it failed to meet the demand side obligations, as most of the stimulus packages provided were on the supply side. Of course, this must be the first step taken as supply must be increased but the next stimulus package focussing demand side must have been given after two or three months but there is still no sign of such a stimulus package.

Since, the country already was undergoing stagflation for more than a year before the start of the Coronavirus pandemic, the Government planned to increase the Supply and provide certain subsidies for the companies, so that more people will not lose their jobs.

Increasing interest rate must be done in order to attract more FDIs (Foreign Direct Investments), but unfortunately since the consumption component of Aggregate demand is very low, increasing interest rate will not be a good option in the short run.

Repo rate (the rate at which the commercial banks get money from the central bank), the cash reserve ratio and the statutory liquid ratio has to be reduced,so that the banks will be able to lend more money out.

Both Statutory Liquid ratio (SLR) and Marginal Standing Facility (MSF), has to be decreased so that Banks will be required to keep only small amount of Government securities as reserves, and the rest can be lend out to the public.

These are some of the Targeted economic policies that can be adopted by Countries around the world.

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