In some countries with advanced economies, it will be decided to extend the lock-down period for a few weeks, the Indian government is analyzing the impact of the world’s largest lock-down that fired millions of people and migrant workers. Was forced to flee. Metro cities at their original locations in UP, Bihar and Jharkhand in search of food and shelter. Under the circumstances, the federal government will decide to expand the lock-down based on an assessment of the situation in each state and decide on the lock-down and restrictions in the districts where coronovirus continues to spread.
It is important to note that the lock-down will lead to a slowdown in export growth and a huge drop in imports of raw materials and capex. The leisure and hospitality industries will face storms. Lower production can be expected from core industries by the end of September 2020.
The overall impact on the economy will be very severe and we expect to see significant volatility in the local currency, bonds and stock markets in the coming months. Financial risk and heavy cash flow mismatch have to be borne by lenders and borrowers in the system.
The gradual fall in the rupee to the 78.00 level and the 10 percent fall in the BSE Sensex from the current level is not an exaggeration, but a conservative estimate as a reaction to ongoing economic realities.
The government may need to provide additional capital support to back banks as the coronovirus epidemic may increase bad debts when economic growth slows. Understanding the liquidity requirements of corporates and small scale industries, infecting sufficient rupee and dollar liquidity in the market through long term repo, OMO, dollar swap auctions, etc. to ease the liquidity position during periods of crisis to the central bank. Does matter.