[srishiva]

The only thing left for India is to Monetise, print money. RBI should take govt bonds and print money. Any borrowing will increase deficit and taxes have to increase ! Even with current tax rates, govt revenue is low and there is no consumer sentiment for demand even with lowering taxes other than essential items. You dont know where to fix in the long chain of dependencies. There are businesses like travel, hospitality etc which are near zero. They cant survive without handing out cash directly, but then for how long ? Taking loan for something like that doesnt work.

Its a situation that the country has built over time. Atma nirbhar sadly during these times is hardly workable. You didnt do it when we were relatively better. Also, you cant fix it like advanced countries.

Businesses within malls will be highly affected. The cinemas and restaurants inside malls deserve this. Its a correction that they needed.

[Miyata]

Originally Posted by srishiva

The only thing left for India is to Monetise, print money.

You may have a point there. Quantitative easing has led to drastic increase in currency supply in the US.

Money Supply in the United States increased to 4844940 USD Million in April from 3883155 USD Million in March of 2020.

Of course, for the US the story is a bit different since much of the world is still quite interested in using the $ as "gold standard" and keep hoarding them. The US still does not see run-away inflation...that can change if the world decides it has had enough of the USD and start to off-load them.

[Samurai]

Originally Posted by srishiva

The only thing left for India is to Monetise, print money. RBI should take govt bonds and print money. Any borrowing will increase deficit and taxes have to increase ! Even with current tax rates, govt revenue is low and there is no consumer sentiment for demand even with lowering taxes other than essential items. You dont know where to fix in the long chain of dependencies. There are businesses like travel, hospitality etc which are near zero. They cant survive without handing out cash directly, but then for how long ? Taking loan for something like that doesnt work.

I am sorry, I don't understand this. What is the purpose of printing money when there is no demand? Doesn't it just devalue the money we already have by causing inflation?

[srishiva]

Originally Posted by Samurai

I am sorry, I don't understand this. What is the purpose of printing money when there is no demand? Doesn't it just devalue the money we already have by causing inflation?

We still need to stimulate without burdening the tax payers and getting more debt burden. Demand will increase slowly and there needs to be a period of time when you need money in hands of people to stimulate that.

I thought there might be something that could explain it better, searched and found this. Indian problem is wasting time when you could do something and now having less alternatives. They could lower GST for people who are not poor enough to get cash stimulus

https://nymag.com/intelligencer/2020...ing-money.html

[Samurai]

US can do it to some extent because they are the reserve currency of the world. US dollar has demand simply because rest of the world will buy it for international transactions or simply as storage of wealth in the time of crisis.

Indian rupee isn't a reserve currency, and cannot be used for purchases outside of India or for wealth storage. If we print money (increase money supply) when the demand has actually gone down, it will trigger inflation.

[SmartCat]

Originally Posted by Samurai

I am sorry, I don't understand this. What is the purpose of printing money when there is no demand?

Correct. Right now, demand is down because consumers are not "behaving" normally. He does NOT want to take his family to restaurants, clothes store or jewellery store or go on a holiday because of fear of contracting the virus. And he is NOT allowed to go to malls or movie theatres or gym, or hold a birthday party.

Originally Posted by srishiva

Demand will increase slowly and there needs to be a period of time when you need money in hands of people to stimulate that.

In the current scenario, stimulus in the form of income tax cuts or GST cuts will not help much. Demand enhancing stimulus can be considered by Govt only after all restrictions are removed, especially on public transport. Even then, consumers will be fearful as long as local TV channels carry 24/7 coverage on Coronavirus.

[srishiva]

There are people's lives at stake due to hunger. Govt can give either if it takes debt or through monetary stimulus. Else, it can only give 20 lakh crore without actually giving anything !

I am not sure if Inflation should be worry. Inject money over stages expecting output to increase. You dont have to outrun supply by a lot. A hard once in a century event and recession should not lead to inflation. Needs a lot of checks and data analysis in real time.

Put in govt's position, there is nothing much it can do. Of course if the lock down continues and if there is no economic activity, results will be catastrophic.

[AltoLXI]

Originally Posted by SmartCat

He does NOT want to take his family to restaurants, clothes store or jewellery store or go on a holiday because of fear of contracting the virus. And he is NOT allowed to go to malls or movie theatres or gym, or hold a birthday party.

Originally Posted by srishiva

Put in govt's position, there is nothing much it can do. Of course if the lock down continues and if there is no economic activity, results will be catastrophic.

New Zealand’s prime minister Jacinda Ardern is encouraging the country into a four-day working week to revive the tourism industry. Wish the world had more such leaders who could think out of box instead of just handing out money.

With an impending opportunity to restructure the New Zealand economy for post-corona reopening, Ardern is exploring a policy suite of uncommon ambition. Hard-hit tourism is New Zealand’s largest export industry, employing 15% of New Zealanders and contributing to almost 6% of GDP, and it was in the context of rescuing this industry that on Wednesday Ardern suggested – informally, in a Facebook Live video from the tourist town of Rotorua – that, should the country move to a four-day working week, more leisure time may allow the domestic tourist market to expand to meet the present shortfall.

Link

[m8002?]

Originally Posted by AltoLXI

. Wish the world had more such leaders who could think out of box instead of just handing out money.

Please read about the economic stimulus in NZ and how their administration took the first pay cuts here.

https://www.cnbc.com/2020/05/05/how-...n-to-zero.html

Last week, New Zealand’s Parliament passed a tax reform package that will see over 3 billion New Zealand dollars ($1.8 billion) refunded to small businesses, taking the total value of fiscal measures implemented amid the crisis up to 23 billion New Zealand dollars, according to local media outlets.

Ardern herself, alongside government ministers and public service chief executives, has taken a 20% pay cut amid the crisis.

We are in a situation where some "real" stimulus is needed to get going. Either follow the US model of sending checks to every citizen or the Europe model where the govt. pays for the employment for 2-3 months for affected industries.

[SmartCat]

Originally Posted by AltoLXI

New Zealand’s prime minister Jacinda Ardern is encouraging the country into a four-day working week to revive the tourism industry.

Remember that there are no new Coronavirus cases in New Zealand - so the islanders can take a holiday if they want to. You do this in India, and we will just watch Netflix for an extra day

Wish the world had more such leaders who could think out of box instead of just handing out money.

NOT handing out money is out of the box thinking. If Govt pays Rs. XXXX per household every month via Jan Dhan accounts, migrants will not come back to cities for work. There will be labour shortage everywhere.

But yes, if there are reports that hunger is increasing, then respective State Govt should act. Additional MNREGA allocation puts some money in the hands of rural household. Also, it is Public Distribution System's job to ensure that nobody goes hungry. Not sure about nationwide efficacy of PDS though.

[ashokrajagopal]

A potential issue that is brewing here in India is if everyone runs into a savings spree, citizens, businesses and Govts. That spreads out to a loop of low demand and deflation.

Technically, there are these things central govt could do in a few days

For the 4lc something crore that the centre owes the states, get them to issue bonds with guarantee of Centre buying back and get RBI to buy it immediately. ie release these amounts so, states are not stifled in health care spends. A punitive charge could be written on to it for later payment by states in case there are audit or other corrections in the amounts.

Create a fund for panchayat level bodies with amount set aside directly from centre for immediate disposal for health care related spents.

Expand Primary Health options by setting up small dispensaries for local medical and other essential supplies.

Fund a grassroots level decentralized grid system for masks and other PPE where self help groups, small traders, households supply to the grid. This requires some software help as well, both at the leaf level and central level, but what do we have the IT world for? Centre only has to subsidize it.

Get the universities together; it is time for all those quick building research like the Gypsum based construction model to arrive at low cost, make shift hospital setups. We will need it now and in the long run, there is anyway a huge shortage of health facilities.

Any woman who can read, write and communicate well is a potential ASHA worker. Double the number of ASHA workers in rural India.

Waiting for urban India to generate enough demand will land us up in a savings glut with large scale unemployment and severe issues with the economy.

[antz.bin]

Originally Posted by SmartCat

If Govt pays Rs. XXXX per household every month via Jan Dhan accounts, migrants will not come back to cities for work. There will be labour shortage everywhere.

How does Universal Basic Income help in a situation like this? It has been the Rahul Gandhi's intent to get it started for quite a while.

Wouldn't the blue collar labour shortage lead to more automation, more high-tech jobs, higher paying jobs?

All this without affecting consumption since those without jobs, the lowest strata, can still buy stuff.

[SmartCat]

Originally Posted by antz.bin

How does Universal Basic Income help in a situation like this? It has been the Rahul Gandhi's intent to get it started for quite a while. Wouldn't the blue collar labour shortage lead to more automation, more high-tech jobs, higher paying jobs? All this without affecting consumption since those without jobs, the lowest strata, can still buy stuff.

There is anecdotal evidence to suggest that MNREGA has resulted in shortage of farming labour and increased agriculture labour costs.
https://www.thehindu.com/news/nation...le24402100.ece

Many farmers’ unions have long complained that MGNREGA has led to a shortage of agricultural labour, and demanded that the scheme should not be available during the months of April to June, between sowing to harvest.

Agriculture and food policy expert Devinder Sharma, who has worked with a number of farmers’ groups, says that land owners are priced out of the rural labour market by the minimum wages paid to workers by MGNREGA. He supports the idea of an April-June closure of MGNREGA

So if we extend this phenomenon to Universal Basic Income, then it is quite likely that large monthly cash transfers will cause significantly distortions in low-end labour market (Eg: textiles, construction etc)

[Thermodynamics]

More trouble for MSMEs...

India is proposing to impose a 15% tax on all chemical and petrochemical imports

to protect the domestic industry in the current fiscal year ending March 2021 as the south Asian nation battles the coronavirus pandemic.

Downstream end-users, however, have posed strong opposition to the measure dubbed as “covid (coronavirus disease) tax” - which was supposed to take effect for 11 months from May 2020 - as this will translate to higher cost of production.

The proposed provisional duty would be applicable on all imports under India’s free trade agreements (FTAs) and would also cover both organic and inorganic chemicals, plastics, rubbers, man-made filaments and staple fibres.

More than 50,000 MSME plastic processors in India have installed capacity to process 55m tonnes and have been operating at 50% capacity due to demand depression

If the recommendation to increase taxes on chemicals is accepted, thousands of MSME’s would close down leading to massive job losses and financial pain.

In a letter to the government on 15 April, the AIPMA complained against the imposition of additional import tax.

The Organisation of Plastics Processors of India (OPPI), the Indian Plastics Federation (IPF), the Plastic export promotion Council (Plexconcil) and the plastics manufacturers associations of the states of Gujarat, Kerala, Karnataka, Tamil Nadu, Maharashtra, Andhra and Telangana were all signatories to a series of AIPMA letters sent to various government agencies opposing the measure.

Domestic polymer producers manufacture only 53% of the polyvinyl chloride (PVC) demand in the country and 47% of country’s consumption is met through imports.

Raising the import duty on such material would be counterproductive for the plastics processing industry.

Similarly, India does not make bio-based polymers, specific medical grade polymers, engineering plastics in primary form, certain grades of polyethylene (PE) & specialty grade polymers.

Source

This is weird, only beneficiere here is RIL. This would make feedstock for MSMEs more expensive and could even make importing a finished product more attractive. RIL would surely increase prices to match expensive imports.

[antz.bin]

Originally Posted by SmartCat

So if we extend this phenomenon to Universal Basic Income, then it is quite likely that large monthly cash transfers will cause significantly distortions in low-end labour market (Eg: textiles, construction etc)

I guess that IS the end goal. Make sure those who work make at least more than the basic minimum that UBI pays. This means only the willing will work, not the needy.

With a substantial portion of the working population taken out of the job market (lower supply, same demand), those who do intend to work will get more responsibility and higher wages.

If the farmers can no longer attract cheap human labour, they either increase the wages, or go for mechanized farming. This increases the demand for manufacturing and leads to better and higher paying jobs being available. This will also give a boost to manufacturing GDP and take the burden to support 45% of the population of India away from the sector which contributes just 15% to the GDP.

As a downside, we do lose one of our biggest strengths as a nation, that of cheap labour. But then, we all would rather be paid more for our quality work than have that *non* strength. China happened to have the same strength till about a decade back, we still can't compete with them even though the minimum wage in India is 1/3 of that of the lowest in China.