Importance of Liquidity during COVID

During COVID, cash crunch and liquidity problems are the factors that affect each and everyone of us be it MNCs or the common migrant workers. Liquidity crunch has hit us all as no one is "paying up". People are just delaying payments, be it the renters or GST payments etc. The Vicious cycle of not being able to get payments along with woes of the future and anxiousness about when the economy revive are all factors leading to further instability of the markets.

The following are the reasons why one should hold on to ones liquidity.
1)Medical needs and hospitalisation: During this corona stricken environment it is absolutely essential to hold on to some liquidity if not all as the money available in the market is not only limited but also people are now holding on to their savings and there is very limited free funds for the economy to revive. At such a time any emergency medical expenses should be able to be taken care of. Thus it is important to hold on to some available liquidity.

2) Currency not being in circulation: As saving and holding liquidity is the new way forward there is limited currency available in the markets due to which even if you have money in the bank it will be extremely difficult in some scenarios to get the currency in hand.

3) Markets: Markets have been on a bull and bear run alternatively. They are so instable at the moment that a simple small up or down movement hurts the sentiments of the entire populace and suddenly there is a bear run. It is therefor difficult to predict the liquidity scenario as far as markets are concerned.

4) Currency exchange with other countries: Since global trade has come to a complete standstill, It currency is not getting exchanged due to which the prices of dollars etc has come to record life time highs. Traders are sceptical whether it will stay that way and so they are not dealing as freely in the currency market as they would have. So it is very important to have a decent amount of cash available at hand.

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