Comptroller and Auditor General of India (CAG) GC Murmu stated that the pace of economic reform will depend on the implementation of various measures taken by governments, calling India’s 68-day tough lockdown a prudent policy decision. He further added that there are differing views among economists, experts, and policymakers on the pace of economic recovery. Although some predict V-shaped recovery, others are not so optimistic. On Thursday, on the fourth annual day of the Insolvency and Bankruptcy Board of India (IBBI), the CAG stated that one needs to wait and see the various measures taken by the government to ensure economic recovery shortly.

Speaking about the impact of the COVID-19 pandemic on the global economy, the CAG added that this is not the first time that humanity has seen such a health crisis. In a comment which betrays absence of knowledge of earlier pandemics the CAG added that the difference about this COVID19 pandemic is that it is truly global in its trajectory and that its effects are highly uncertain.

He said that governments around the world have taken steps towards implementing mitigation measures, assessing the situation both in their countries and around the world. The report of CAG added that the intensity of the epidemic has disrupted the global economy in proportions and dimensions almost identical to the Great Depression of 1929 and the sub-prime crisis of 2008.

According to the International Monetary Fund’s (IMF) World Economic Outlook report of June 2020, as a result of the epidemic, the global economy is projected to contract at a faster pace of 4.9% in 2020, experiencing the worst recession since the Great Recession. This makes this crisis even worse than the global financial crisis of 2008, as accepted in the CAG report.

The report by CAG further added that the cumulative loss to global GDP [gross domestic product] over 2020–21 is estimated at around the US $ 9 trillion. The United Nations Conference on Trade and Development (UNCTAD) estimates that the epidemic will likely cost the global economy between $ 1 trillion and $ 2 trillion in 2020.

As the virus spreads, the economic impact of the crisis will test the resilience of our economic and financial structures as stated in a lecture on ‘Insolvency and Bankruptcy Code (IBC) in the context of the CAG report. The lecture further highlighted that adaptability is key to sustainable reforms in the times of such an epidemic.

The CAG stated that the impact of IBC is “quite evident” in just four years of its implementation with its “justice-oriented” behavioral consequences especially after the pandemic induced lockdowns which impacted and shut down many businesses.

Emphasizing on the need of the IBC in the time of the pandemic, as of June 2020, approximately 3,900 corporates, have been admitted to the CIRP [corporate insolvency resolution process]. Around 1,205 CIRPs have completed the process of completing resolution plans or ending the liquidation orders.

The CAG further stated that the government formulated the country’s bankruptcy code which showed its utility during the COVID-19 phase, and that in the long run, it is expected that measures taken in the short and medium-term will be successful in preserving the lives of companies and the livelihood of individuals in crisis.