Massive Indian response to combat Covid-19
To try and prevent the spread of Covid-19, the Indian government imposed a nationwide lockdown on 24 March. Since late May, the re-opening has started and the country entered Unlock 2.0 phase on 1 July 2020 with a focus on bringing economic activity back on track. The government has issued massive stimulus packages and policies to counter the macroeconomic stress caused by the lockdown.
For about two months, the whole of India basically was in a standstill. The impact is turning out to be more severe than initially anticipated, according to the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI). The MPC notes that various sectors of the economy are experiencing acute stress, with the impact of the shock having been compounded by the interaction of supply disruptions and demand compression. It noted that the inflation outlook for the months to come was highly uncertain.
Stimulus packages & policies
A total stimulus package of 264 bn USD to counter macroeconomic stress (13 May) of which 22.6 bn USD was announced on 23 April to support the poor and food security.
The package also includes around 40 bn USD collateral free loans to ease pressure on MSME sector.
Transformational effects
India is to be self-reliant by encouraging exports and incentivising localisation to improve resilience of supply-chain. For example, with a strong push from government and local demand, India became a net exporter of PPE kits from being a net importer just within three months of Covid crisis. The government also prepares for fast liberalisation of otherwise centrally managed industries such as mining, defence production, space/aerospace industries and power distribution.
The situation for MSMEs
The United Nations Industrial Development Organization (UNIDO) has conducted a survey among 85 micro- small- and medium-sized enterprises (MSMEs) and asked about the challenges they are facing and their expectations and plans for the revival of their businesses once the lockdown is lifted. In short, the main challenges for restarting businesses are:
- COVID-19 will remain around and create a high degree of uncertainty in all aspects of business.
- When restrictions are lifted, the market is expected to be very tight and extremely cash-constrained.
- Manpower will be a constraint, with MSMEs indicating that 30 to 70 per cent of their pre-COVID-19 workforce may have migrated back to their hometowns due to uncertainties and loss of income during the lockdown.
- Those MSMEs that are critically dependent on specialized parts from other states or from abroad express concerns about their vulnerability to supply shortages.
Crisis packages in Sweden
In Sweden, the government has presented several crisis packages to mitigate the economic effects of the Covid-19 outbreak. Among the measures taken are:
- A loan guarantee programme for small and medium-sized businesses.
- 3 bn SEK (0.3 bn USD) has been granted to Almi to increase ledning to small and medium-sized businesses.
- A temporary discount in fixed rental costs in vulnerable sectors.