Are there signs of good days in the corona round in the stock market?

The month of March had started when the Corona epidemic started taking India under its control. By the end of the month, the government put a lockdown across the country. Business, production, work all came to a standstill.

The mass exodus of the workers worsened the situation. At that time, there was a sudden sharp decline in the stock market and it was speculated that the way forward for the country was going to be extremely difficult.

But by the end of June, the stock market had seen a slight increase and hoped that the economy might have started recovering from the epidemic.

But on Friday, Reserve Bank Governor Shaktikanta Das said that the growth seen in the stock market is far from the real situation of the economy.

He said, “There is a lot of cash available in the global financial system, due to which the stock market is seeing a sharp trend. It is completely different from the situation in the real economy. “

For the common man, the decline or increase in the country’s stock market is an indication of whether the country is progressing on the economic path.

In such a situation, how should we understand the concern that the RBI governor has expressed about the economy.

Market share is not a mirror of economy

Economist Ritika Kheda says that fluctuations in the stock market are like gambling for a handful of rich people, it would be a mistake to call it a mirror of the entire economy of the country.

He believes this because “According to a survey, 80 percent of the people in the country earn less than Rs 10,000 per month. There are about 20 percent people who have written contract for jobs. Only 17 percent people are employed. One-third people are daily wage laborers, while 47 per cent are those who work on their own, ranging from vegetable sellers to blacksmiths, potters, cycle fixers. ”

She says, “Our understanding of the common man is limited to those who have a small number of savings. But those who are 80 percent have health and employment difficulties and have no special connection with the stock market. This country “People are ordinary people. But the irony is that if work is done for the common man in the country, then the hunger and disease of the people should be tracked.”

At the same time, Ila Patnaik, economist and former Principal Economic Advisor of the Ministry of Finance, says that the stock market does not reflect the state of the economy today.

She says, “The stock market does not say anything about the current situation, rather it reflects what is going to happen next.” The first is that there are many kinds of concerns in the minds of the people, such as whether the market will recover again or not, whether the effect of the Corona epidemic is decreasing now. People have less hope for today’s situation, but they have hope for the time ahead. “

“Another reason for this is that people also see where they can invest money. When people invest more money in the market, it increases the money in the market, which is seen as an increase in the stock market. Only in view of these two factors can we try to understand the economy. “

 “Nifty and Sensex reflect the performance of some 30 and 50 companies. People have invested in them, due to which their shares are increasing and if their shares increase, then the market will see an increase. But the condition of small and medium companies is bad. “

Third consecutive and serious injury to the economy

Corona has created a third major difficulty in front of the country’s economy. In November 2016, the economy hit the note ban, when suddenly 500 and 1000 currency notes were stopped overnight.

The government said that this has been done to act on fake currency and black money and number two money present in the economy.

But a few months later, the RBI report made it clear that 99 percent of the notes removed from the trend have returned to the banks. That is, almost all the black money that was present in the form of cash was deposited in banks.

But due to demonetisation, the country’s economy, which runs on cash, got a strong break, which completely shook the unorganized sector of the country.

The BJP’s own association also said on demonetisation, “Two and a half million units in the unorganized sector have been shut down and the real estate sector has been badly affected. A large number of people have lost jobs.”

After that, India’s economy suffered as GST.

Economist Professor Arun Kumar told the BBC in September 2019 that GST does not apply to unorganized sectors but it has an impact on organized sectors.

He said that this increased confusion among the organized people and they could not file GST. Meanwhile, on the one hand, the problem of NPAs came in front of banks, on the other hand, non-financial companies also faced difficulties. This had an impact on employment. Overall, this was the second major push to the economy.

After this, the situation looked a bit cautious by 2020, but an unknown virus again presented a formidable challenge to the economy. This time not only the Indian economy, but also the economic situation of other countries of the world was shaken.

But the case in India became worse due to the exodus of the workers. The government imposed a lockdown, but it failed to assess that once again its worst impact will be on the workers.

Ritika Kheda says, “First demonetisation broke the back of those who depended on cash, then GST broke the back of the business class, whose money was stuck. The lockdown imposed by Corona after that was like ending the economy. “

Dinesh Upreti says, “It can be said that the situation is improving compared to May and June. But at present, neither the companies are working fully nor the supply chain has been able to connect again as before. In such a situation, the situation seems far from normal. “

What should be the priority of the government in the current situation Economist Ila Patnaik says that the current situation in the stock market should be taken positively.

She says, “We can assume that the larger negative shock expected for the economy, the larger the negative shock does not appear. The kind of fear and panic that was there in the initial phase of Corona has reduced. When we see today, we are coming back to the 70 percent level of production before the epidemic. “

“Employment opportunities are returning fast. However, it cannot be denied that the money received by the people has reduced. But even then it was thought that there would be mass unemployment, deaths of people, as before it was not such a bad situation now. “

Economist Ritika Kheda says, “The stock market alone does not represent the health of the economy, with it 10 more indicators should be added, only then you will be able to say that the economy is really good.”

Ritika Kheda says that the government’s priorities are still not focused on the right place, while the government needs to raise money in its hands.

She says, “The government needs to make demand and supply balance, for which they will have to pay money in the hands of the people.” And for this, it is important to have money in the treasury of the government as well. For this, she can think of imposing wealth tax on the millionaires. “

Ela Patnaik calls the Indian economy as an economy in transition.She says, “At a very high level, the economy is moving from either the unorganized sector to the organized sector, from rural to urban, non-industrial to industrial and from small scale industry to large scale industry. In such a situation, many such policies are made, which appear to have a bad effect in a short time. But it has its benefits in the long run. GST is such a system, which will prove positive change in the long run and will increase the government’s tax base. “

She says, “Before the Corona epidemic, there were signs of recovery in the economy, but the lockdown caused by Corona created much difficulty. The economy of independent India had never seen so much difficulty. But our situation is not as bad as it was at present. ”