The study aims to make an assessment of COVID-19 on Indian economy by analysing its impact on growth, manufacturing, trade and micro, small and medium enterprises (MSME) sector, and highlights key policy measures to control the possible fallout in the economy. The impact of the pandemic across sectors and in different scenarios of complete, extended and partial lockdown, and at different levels of capacity utilization is massive on the Indian economy. India’s economy may barely manage to have a positive growth of 0.5 per cent in an optimistic scenario but also faces the possibility of a 3–7 per cent negative growth in worst case scenarios for the calendar year 2020. The impact is severe on trade, manufacturing and MSME sectors. The likely impact (deceleration) of COVID-19 from best case scenario to worst scenario are as follows: manufacturing sector may shrink from 5.5 to 20 per cent, exports from 13.7 to 20.8 per cent, imports from 17.3 to 25 per cent and MSME net value added (NVA) from 2.1 to 5.7 per cent in 2020 over previous year. The economy is heading towards a recession and the situation demands systematic, well targeted and aggressive fiscal-monetary stimulus measures.
The Indian banking industry is undergoing the rollout of innovative banking models in the form of more promotion to private banks for attaining the productivity and efficiency. However, increase in the quantity of non-performing assets, poor credit growth and low profitability of Indian banks cast doubt about the industry’s resilience towards maintaining the country’s economic growth trajectory. While taking lessons from global regulatory bodies and keeping in view the domestic problem of the Indian banking industry, the dire need of the hour is to maintain proper checks and balances on banking transactions. The article goes on to sum up the various measures initiated by government to deal with banking-sector challenges and how an attempt is made to adapt regulatory measures from global best practices which could help the banking sector in India become more robust, efficient and effective in preventing all fraudulent transactions and enhancing the quality of its assets.
Indian economy took a historic move of banning high denomination notes measured as 87 percent of total currency in November 2016. The early objectives of the move were linked to various issues such as curbing black money, removing counterfeit currency and stopping terrorist funding. But in due course the implications of demonetisation have been pronounced in the form of wider tax base through accounted income, progress towards a cashless economy, increase in bank deposit balances under Basel III accord, controlling inflationary activities, removing the asset bubbles through limited cash availability, etc. In this regard, several academics have carried out their own analysis of demonetisation and its effects but most of the research work has addressed the partial effects of the demonetisation move and have been carried out in the early months of the move. But now that the economy has crossed about one and a half year of this landmark reform, there is ample scope to measure the true impact of demonetisation on the financial system, inflation and real economy of India. The paper concludes that overall the effects of demonetisation on the economy can be said to be neutral. Interestingly, macro indicators of the economy have improved in recent years despite two major initiatives of demonetisation and GST reforms. This reflects that the resistance of the Indian economy continues due to its strong demand. This is of prime importance for reviving investment in the economy, which in turn, has wider implications for the overall growth and development.
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