Financial Markets and the Economy - Intersections

( The following article appeared in Bloomberg Quint on March 30, 2020, link below: https://www.bloombergquint.com/coronavirus-outbreak/all-that-needs-to-be-done-to-fix-a-covid-19-wrecked-economy  ) Policy at the time of Covid-19 When a financially constrained household is hit by a severe medical emergency, it faces a dreadful, unspeakable dilemma – balancing monetary cost with the human outcome. With Covid-19, whole nations, India included, face this predicament.  Whatever choices we make, we will likely incur significant humanitarian and economic costs. In addition, the duration and extent of this crisis remains very unclear as yet. Against this backdrop, we need a two-fold economic policy response. First, we need an emergency response to avert a humanitarian disaster. At the same time, we have to consider life after Covid-19. Our already vulnerable economy will suffer a body blow, and in the end, we could find ourselves at policy crossroads.   ...

( The following article appeared in Cogencis on March 23, 2020, link below: http://www.cogencis.com/newssection/chome/covid-19-and-indias-fisc-monetary-options/ ) Covid-19 and India’s Fiscal & Monetary Options  Covid-19 is first a medical challenge, with a sizeable human cost. Even as our good doctors & health authorities address the crisis though, we must consider the implications for the economy, financial markets, fiscal and monetary policy, and regulatory interventions.  Addressing the Economy – Fiscal Response The war against Covid-19 could be long and arduous. Livelihoods will be lost, demand will slump, and businesses will struggle. Economic activity will sharply reduce, before eventually limping back once the medical emergency has been addressed. This could take a long time. Even fiscal hawks (present company included) will attest that we need a pump now to make up for lost economic activity. In a war, we have to borrow from our future....

( The following article appeared on Moneycontrol on March 13, 2020, link below: https://www.moneycontrol.com/news/business/economy/policy-indian-economy-is-fighting-two-battles-but-its-not-that-bad-5029431.html ) The Indian economy is battling a war on two fronts now – the global market dislocation on the back of the covid-19 pandemic, and the vulnerabilities of our own domestic economy.  The Bigger Global Battle The first – and bigger battle for now - is clearly the fluid worldwide risk-off context. As it is, amidst trade wars and geopolitical flashpoints, the world had entered 2020 fearing an economic slowdown. The added battle against the covid-19 pandemic will almost certainly result in a sharp reduction in worldwide economic activity. That could result in bankruptcies, layoffs, and credit defaults, even as whole societies battle serious health hazards.  As these primal fears play out, markets are experiencing sharp dislocation. Yesterday’s 10% fall in th...