Qsn 1 – Fiscal policy during Covid

On March 26, 2020, the Finance Minister announced a stimulus package valued at
approximately 0.8 percent of GDP. The significant components of the package include:
• cash transfers to lower-income households and transfers in kind such as food items,
cooking gas etc
• insurance coverage for workers in the healthcare sector;
• wage support to low-wage workers who continued working
These measures are in addition to 150 billion rupees (about 0.1 percent of GDP) allocated to
health infrastructure, including for testing facilities for COVID-19, personal protective
equipment, isolation beds, ICU beds and ventilators.
State governments adopted measures to support the health and lower-income households.
• The measures by state governments varied from state to state and included direct
transfers in the form of free food, free rations and cash transfers.
During May, 2020 many new measures (forming about 2.7 percent of GDP), were announced,
including many measures targeting businesses. These include
• support for poor households, especially migrants and farmers (about 1.5 percent of GDP),
• targeted support for the agricultural sector (about 0.7 percent of GDP),
• expansion of existing programs providing work opportunities to low-wage labourers
(about 0.2 percent of GDP).
The business-support package composed of;
(a) financial sector measures for MSME and NBFC; liquidity injection for electricity
distribution companies; and a reduction in up-front tax deductions for workers.
(b) measures to ease the tax compliance burden across different sectors included
postponement of select tax-filing and other compliance deadlines.
(c) reduction of interest rate charged on overdue filings of small businesses to half of what
is payable.
(d) additional support was declared for migrants as well as farmers, mainly in the form of
providing concessional credit to farmers as well as credit facility for street vendors.
Infrastructure development constituted the major support for the agricultural sector.

Qsn 2 - Monetary and Macro financial policies during COVID pandemic

Major initiatives announced by the RBI till June 30th, 2020 are as under -
1. Reduction in repo and reverse repo rates by 115 and 155 basis points (bps) to 4.0 and
3.35 percent, respectively, and announced liquidity measures across three measures
comprising
• Long Term Repo Operations (LTROs),
• a cash reserve ratio (CRR) cut of 100 bps, and
• an increase in marginal standing facility (MSF) to 3 percent of SLR
2. Relief to both borrowers and lenders and SEBI temporarily relaxed the norms related to
debt default on rated instruments.
3. Facility to help with state government's short-term liquidity needs
4. Introduced regulatory easing measures to promote credit flows to the retail sector and
micro, small, and medium enterprises (MSMEs)
5. CRR maintenance for all additional retail loans has been exempted, and the priority sector
classification for bank loans to NBFCs has been extended for on-lending for FY 2020/21.
6. During April 17-20, the RBI, along with additional monetary easing, announced:
(a) Special refinance facilities for rural banks, housing finance companies, and small and
medium-sized enterprises;
(b) A temporary reduction of the Liquidity Coverage Ratio (LCR) and restriction on banks from
making dividend payouts;
7. State’s Ways and Means Advance (WMA) limits have been increased by 60 percent and
the limit for the central government’s WMA for the remaining part of first half of the FY
2020/21 has been revised up to 2.0 trillion.
8. Financial institutions required to assess the impact on their asset quality, liquidity, and
other parameters from the COVID-19 shock and take immediate contingency measures.
9. Measures targeting businesses:
(i) A collateral-free lending program with 100 percent guarantee,
(ii) Subordinate debt for stressed MSMEs with partial guarantee, and
10. The GST council announced that it would halve the interest rate charged on overdue
filings of small businesses.
11. On exchange rate and balance of payments
• A second FX swap ($2 billion dollars, 6 months, auction-based) in addition to the previous
one with equal volume and tenor.
• The limit for FPI investment in corporate bonds has been increased to 15 percent of
outstanding stock for FY 2020/21.
• Restriction on non-resident investment in specified securities issued by the Central
Government has been removed.
• Foreign direct investment policy has been adjusted requiring that an entity of a country
that shares a land border with India can invest only after receiving the government approval.
Can the GDP of a country be taken as an index of welfare of people in that country?

GDP measures our ability to make our life better; yet leave out many important aspects which
ensure good quality of life for all.
(a) Income distributions and, therefore, GDP per capita is a completely inadequate measure
of welfare. Countries may have significantly different income distributions and, consequently,
different levels of overall well-being for the same level of per capita income.
(b) Productions hidden from government authorities, either because those engaged in it are
evading taxes or because it is illegal (drugs, gambling etc.).
(c) Nonmarket production and Non-economic contributors to well-being for example: health
of a country’s citizens, education levels, political participation, or other social and political
factors that may significantly affect well-being levels.
(d) The disutility of loss of leisure time. We know that, other things remaining the same, a
country’s GDP rises if the total hours of work increase.
(e) Economic ’bads’ eg: crime, pollution, traffic congestion which make us worse off.
(f) Many things that contribute to our economic welfare such as, leisure time, fairness,
gender equality, security of community feeling etc.,
(g) Both positive and negative externalities which are external effects that do not form part
of market transactions
The distinction between production that makes us better off and production that only
prevents us from becoming worse off, for e.g.
1. Defence expenditures such as on police protection. Increased expenditure on police due
to increase in crimes may increase GDP but these expenses only prevent us from becoming
worse off. However, no reflection is made in national income of the negative impacts of higher
crime rates.
2. Automobile accidents result in production of repairs, output of medical services, insurance,
and legal services all of which are production included in GDP just as any other production.

Qsn 4 - Details of India’s disputes at WTO (as on 16.03.2020)

India currently has 15 disputes with other members of WTO (4 as Complainant and 11 as
respondent)
A. Disputes where India is a Complaining party (4 cases)
(i) DS436 (Countervailing duty by United States on Indian steel products)
Respondent- The United States
(ii) DS-503(Measures by US concerning non-immigrant visas)
Respondent- The United States
(iii) DS-510 (Sub-Federal Renewable energy programmes of US)
 Respondent- The United States
(iv) DS-547 (Certain measures by US on Steel and Aluminium products)
Respondent- The United States

B. WTO disputes where India is a Responding Party (11 cases)

(v) DS-430: (Prohibition by India on Import of poultry and poultry products)
Complainant – The United States
(vi) DS-456 (India’s Measures Relating to Solar Cells and Solar Modules under
National Solar Mission dispute) Complainant – The United States
(vii DS-518 (India’s safeguard measures on import of iron and steel products)
Complainant – Japan
(viii) DS-541 (India’s Export Promotion Schemes)-Complainant-United States
(ix-xi) DS579, DS580 and DS581 (India-Measures Concerning Sugar and Sugarcane)-
Complainants- Brazil, Australia and Guatemala, respectively
(xii-xiv) DS582 and DS584, DS588 (India-Tariff Treatment on Certain Good in the
Information and Communications Technology Sector)-
Complainants- EU, Japan and Taiwan, respectively
(xv) DS-585 (Additional duties on certain products from US) - Complainant– The United
States