COVID -19: COORDINATED AND SYNCHRONIZED FISCAL STIMULUS POLICY ACTION FOR BECOMING STRONGER AND HEALTHY ECONOMY OF INDIA

As of April 16, India has 10,824 reported COVID-19 cases with 420 deaths due to the disease. Prime Minister Modi announced on 24 March that the entire country will be closed for the next 21 days, now extended to 3 May. Prior to this announcement, numerous containment measures had already been imposed, varying in intensity across the country, including travel restrictions (complete restriction of incoming international commercial passenger aircraft and some restrictions on domestic travel including cancellation of domestic passenger air traffic); Closure of educational establishments, gyms, museums and theatres; prohibition of mass gatherings; and encouragement of companies to promote remote work. On April 15, the government announced several relaxation measures in geographic areas designated as non-hotspot with effect from April 20, 2020 with a view to supporting economic activities.
THE ACTION AREAS FOR A BECOMING STRONGER AND HEALTHY ECONOMY OF INDIA ARE FOLLOWING:-
FISCAL
More fiscal stimulus is required to prevent long-lasting economic harm. Recently announced budgetary initiatives are being deployed on a number of policies that urgently prioritize health expenditure and those in need. We know that robust prevention strategies – in conjunction with early detection – can slow down infection rate and virus spread. Governments will continue to broaden these efforts to meet the individuals and companies most affected — with initiatives that include expanded paid sick leave and targeted tax relief. Beyond these positive actions by individual countries, as the virus spreads, the case for a concerted and synchronized global fiscal stimulus for India's increasingly strong and healthy economy.
Finance Minister Sitharaman announced a stimulus package worth about 0.8 per cent of GDP on March 26. The main elements of the program are: in-kind (food; cooking gas) and cash transfers to lower-income households; medical coverage for healthcare employees; and wage assistance for low-wage workers (in some cases for those who are still working, and in other cases by ease of the requirements for obtaining compensation in case of job loss). In addition to a previous pledge by Prime Minister Modi, these initiatives would contribute an additional 150 billion rupees (approximately 0.1 per cent of GDP) to health infrastructure, including testing facilities for COVID-19, personal protective equipment, isolation beds, ICU beds and ventilators. Several steps have also been reported to ease the tax enforcement burden across a number of industries, including postponing certain tax-filing and other deadlines for enforcement. Many state governments have also announced measures to support the health and well-being of low-income households, primarily in the form of direct transfers (free food rations and cash transfers)—the magnitude of these measures varies by state, but to date, aggregate measures amount to about 0.2% of India's GDP.
MONETARY AND MACRO-FINANCIAL
Central banks in advanced economies will continue to support demand and boost confidence by loosening financial conditions and ensuring the flow of credit to the real economy. For instance, the US The Federal Reserve has just announced further reductions in interest rates, asset purchases, forward guidance and a decrease in reserve requirements. . As the institute  for International Finance said last week, since the onset of the crisis, investors have pulled almost $42 billion from emerging markets. This is their largest outflow ever recorded. So the policy action of central banks in emerging markets and developing economies will need to balance the particularly challenging challenge of tackling reversals in the capital flow and commodity shocks. In times of crisis like now, foreign exchange interventions and capital market control steps will supplement interest rates and other monetary policy actions in a useful way.
On March 27, the Reserve Bank of India (RBI) decreased repo and reverse repo rates by 75 and 90 basis points (bps) to 4.4 and 4.0 percent, respectively, and announced liquidity measures to the tune of 3.7 trillion rupees (1.8 percent of GDP) across three measures including Long Term Repo Operations (LTROs), a 100 bps Cash Reserve Ratio (CRR), and an increase in marginal standing facilities. The CRR had been withdrawn earlier in February for all retail loans in order to reduce financing costs The RBI offered relief to both borrowers and lenders, allowing companies to provide a three-month moratorium on loan repayments and India's Securities and Exchange Board temporarily relaxed debt default rules on classified instruments. Around the same time, six months postponed the introduction of the net stable funding formula and the final stage of phased-in adoption of the capital investment buffers. On April 1 the RBI developed a facility to help with the short-term liquidity needs of the state government and relaxed export repatriation limits. RBI revised trading hours for different markets on April 3 in order to maximize thin capital and ensure staff health. Earlier, the RBI implemented regulatory steps to promote credit flows to retail and micro, small and medium-sized enterprises (MSMEs) and provided MSMEs and real estate developers with regulatory forbearance on asset classification of loans. CRR maintenance has been removed for all additional retail loans, and the priority sector classification for bank loans to NBFCs has been extended to FY 2020/21 on-lending. The RBI asked financial institutions to determine the effect of COVID-19 spreading on their asset quality, liquidity and other parameters, and to take immediate contingency steps, including BCPs, to mitigate the risks following the effect evaluation.
REGULATORY RESPONSE
Supervisors of the financial system would strive to maintain the balance between preserving financial stability, maintaining the soundness of the banking system
and sustaining economic activity. This crisis will stress check whether the changes brought about in the aftermath of the financial crisis would serve its intent. Banks should be allowed to use flexibility in existing regulations, for example through the use of their capital and liquidity reserves, and renegotiate the terms of loans for stressed borrowers. Risk disclosure and clear communication of supervisory requirements will also be crucial to the proper functioning of markets in the time ahead.
The IMF stands ready to mobilize its lending power of $1 trillion to support our membership. The Fund can deploy its flexible and rapidly disbursing emergency response toolkit as a first line of defence to help countries with urgent balance of payment needs. These instruments could provide the emerging and developing economies with $50 billion in cash. Our low-income members could have access to up to $10 billion through our concessional financing facilities which carry zero interest rates. The Fund already has 40 ongoing arrangements—both disbursing and precautionary—with combined commitments of about $200 billion. In many cases, these arrangements can provide another vehicle for the rapid disbursement of crisis financing. We also have received interest from about 20 countries and will be following up with them in the coming days. In addition, the Fund's Disaster Containment and Relief Trust (CCRT) will provide immediate debt relief to the poorest countries, which will generate critical resources for health care, containment, and mitigation. In this context, I applaud the recent commitment of $195 million from the United Kingdom, which means that the CCRT now has around $400 million available for future debt relief. Our goal is to raise it to $1 billion with the assistance of other donors. The IMF will thus represent its 189 member countries and show the importance of international cooperation. Since, at the end of the day, our responses to this crisis do not come from one isolated process, one area or one nation. Only through sharing, coordination, and cooperation will we be able to stabilize the global economy and return it to full health.
EXCHANGE RATE AND BALANCE OF PAYMENTS
In addition to the previous one with equivalent volume and tenor, RBI announced a second FX swap on March 16 ($2 billion dollars, 6 months, auction-based). For FY 2020/21, the cap for FPI investment in corporate bonds has been set to 15 per cent of outstanding stocks. Restrictions on investment by non-residents in particular securities issued by the Central Government have been lifted.