Coping during uncertain times

Last week, the World Health Organization designated the spread of Coronavirus (COVID-19) a global pandemic. Italy locked down the entire country, asking its people to avoid non-essential travel, even as other countries reported more cases. Many, including India and United States, restricted inbound travel from affected countries. The fear of a severe economic impact from the pandemic hit the financial markets that had ignored interest rate cuts by central banks in many major economies.  


The better news included falling numbers of virus-affected people in Asia, especially in China and South Korea. More factories are returning to normal activity in China. The spat between Russia and Saudi Arabia resulted in falling crude oil prices that would help its major importing countries; India is one. And, officially confirmed cases of the virus are still only in double-digits here. 


There is little doubt that global demand for goods and services will fall in the coming months, especially in developed countries, people being advised to avoid travel, quarantine oneself and stay at home. Oil producing countries, especially in West Asia, are also likely to buy less with their lower revenue. The falling demand is bound to negatively affect our export and, in turn, employment prospects. Even remittances from Indians abroad could go down. However, this need not necessarily adversely impact our balance of payments, as the import bill will also be lower due to falling crude oil prices.


On the public health front, our government has assured that all effort is on to contain spread of the virus. As of now, there are no credible reasons to doubt that. The Reserve Bank of India asked states not to pull out funds from private banks and offered dollars for six months through sell-buy swaps to ensure supply at a time of turmoil in global markets.


At a time of such great uncertainty and disruption, the government could let businesses cope with the evolving situation, rather than introduce changes. That is what the Goods and Services Tax (GST) Council did in its 39th meeting on Saturday — it decided to defer implementation of the e-invoice system and new returns till end-September.  Remaining glitches in the GST Network could be fixed in the meantime and the trade encouraged to run trials for e-invoices and new returns, something few have done so far.


Last Friday, the Union Cabinet approved replacement of the Merchandise Exports from India Scheme (MEIS) with a Reimbursement of Duties and Taxes on Export Products (RoDTEP) scheme. Broad contours of the latter are known but rates of reimbursement have yet to be announced.


The current indication is that MEIS will be phased out gradually, as and when RoDTEP rates are finalised by an experts committee.


Taking advantage of the fall in crude oil prices, the government has raised excise duties on petroleum products. It would be better if some of the gain is passed on to consumers of petrol products by way of lower prices. That will put more money in their hands and help revive flagging demand. 


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