Small businesses still waiting for stimulus package

The fall in March trade figures is only the beginning of a trend that is likely to continue in the first quarter of this fiscal year

Merchandise exports and imports went down in March because of the Covid-19 outbreak. Exports last month were $21.41 billion, against $32.72 billion in March 2019, a contraction of 34.57 per cent. Imports in March 2020 were $31.16 billion, as against $43.72 billion in March 2019, a fall of 28.72 per cent. 
 

The fall in March trade figures is only beginning of a trend that is likely to continue in the first quarter of this fiscal year and beyond, despite claims of ‘flattening the curve’ in some  Covid-affected countries and  talk of re-opening the economies that had gone into lockdown. 

The International Monetary Fund (IMF), in its latest World Economic Outlook report, says as a result of the pandemic, the global economy is projected to contract sharply by 3 per cent in 2020, much worse than during the 2008–09 financial crisis. The World Bank, in its latest South Asia Economic Focus report, estimates that regional growth will fall to a range between 1.8 and 2.8 per cent in 2020, down from 6.3 per cent projected six months ago. The World Trade Organization (WTO) projects that trade will fall steeply in every region of the world and across all sectors of the economy. In an optimistic scenario, the volumes of global trade in goods could tumble by 13 per cent in 2020, and that if the pandemic is not brought under control and governments fail to coordinate policy responses, the decline could be 32 per cent, or more.

Given the grim scenario, the governments across the world have ramped up health care facilities and social distancing norms to quickly bring the pandemic under control, and announced many measures to help those in distress, give loans to business entities to help them tide over the crisis, and boost liquidity in the system. The effects of these initiatives are yet to play out fully. 

A few weeks ago, our government announced a package of measures to help the poor. The legal compliance norms were relaxed to help the trade get through the lockdown and comply later. The refunds due to the exporters and other taxpayers were expedited. The Reserve Bank of India (RBI) announced a slew of measures to put more money in the hands of banks to lend.

Last week, the government extended the lockdown until May 3 and issued guidelines to let economic activities restart in certain areas and certain sectors. This includes allowing production and other activities to commence in Special Economic Zones, export-oriented units, industrial estates, industrial areas and rural areas, subject to their adhering to specified norms for social distancing, sanitation and basic hygiene. The norms for movement of goods and documents have also been relaxed. Some self-employed professionals and businesses in the information technology sector have been allowed to work. The effects of these relaxations in containment of Covid-19 will have to be monitored closely. 

Last week, Ahmedabad Air Cargo Complex suspended its operations when it was found that one of the family members of the staff of one of the Customs Brokers had tested positive for Covid-19. Such unexpected disruptions may come in the way of smooth operations and complete revival of the economy soon. Even so, a stimulus package to help the small businesses is overdue and hopefully, will be announced soon.

email : tncrajagopalan@gmail.com