New Delhi: The Finance Commission on Friday met for the 15th annual meeting to discuss the challenges faced due to the impact of coronavirus pandemic and nationwide lockdown on India’s economy. Also Read - Will CBSE Promote Class 12 Students by Implementing Class 10 Assessment Plan? Final Decision On THIS Date

Following its two-day virtual meeting, the council was of the view that the shutdown of industries and import-export businesses may result in a drastic slowdown of the Indian economy, given that the global market is already facing one of the worst recessions. Also Read - 14-Day Lockdown Begins in Karnataka. Strict Restrictions on Public Movement Till May 24 | Here's What You Should Know

“15th Finance Commission in meeting with its Advisory Council on 23-24 April, felt that impact of COVID-19 and national lockdown on Indian economy can come through slowdown in domestic activity,its impact on cash flows of financial institutions and business enterprises,” the Finance Commission said in a statement. Also Read - Meera Chopra Blames Lack of Medical Infrastructure And Not Covid-19 For Her Cousins Death

With regard to NBFCs (non-banking financial companies), the council said that its suggestions were designed to avoid bankruptcies and deepening of NPAs in the financial sector. The Reserve Bank of India will have a key role in ensuring that financial institutions are well-capitalised, it said.

“Further, loss of global demand for Indian products because of a steep global recession. Members were unanimous to suggest that projections of real GDP growth made before March 2020 needs to be relooked entirely and revised downwards considerably,” it observed.

The Council members felt that the shortfall in tax and other revenues will be large due to subdued economic activity. Hence, fiscal response to the crisis should be much more nuanced. It is important not just to look at the size of fiscal response but also carefully at its design, it suggested.

“Non-banking financial companies are also affected by the slowdown. In order to avoid bankruptcies and deepening of NPAs in the financial sector, measures should be appropriately designed. Measures like partial loan guarantee may help. The Reserve Bank of India will have a key role in ensuring that financial institutions are well-capitalized,” the Commission further stated.

The advisory council noted that the state debt has gone up considerably, causing a growing concern over the transparency by some states in mentioning the correct borrowing figures. However, this is not the first time the commission has pointed out these concerns.

Notably, the coronavirus pandemic has stalled not only the nationwide economic activities but also around the world due to restrictions in travel to contain the spread of the virus.