InvestorQ : Are Indian households really feeling the liquidity pinch due to the COVID-19? Could it get worse?
ishika Banerjee made post

Are Indian households really feeling the liquidity pinch due to the COVID-19? Could it get worse?

Answer
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Niti Shenoi answered.
6 months ago


Intuitively, one can say that there is a liquidity pinch because revenue sources have slowed due to inactivity. But one proxy we can use is the extent of EPF withdrawals, which was specially permitted by the government to tide over this crisis. There has been a virtual surge in EPF withdrawals during this period. The EPFO data has confirmed that they had processed a total of 3.31 lakh claims and disbursed close to Rs.946 crore in the last 15 days. The figures could multiply over the next few days as the lockdown continues. It may be recollected that due to the lockdown, the government had allowed employees to apply for a non-refundable withdrawal of lower of 3 months wages or 75% of the EPF balance. While this is a good liquidity generating measure, this is tantamount to withdrawing from future savings and to that extent will impact the social security of Indian households.