V-shaped recovery in 2021
By: Equilibria Gipe
Tags: Pandemic, India, Covid 19, Vaccines, Gdpr

How a swift mobilization of union machinery is paving the way for economic revival from the pandemic

Amidst a once in a century crisis ‘The COVID-19’ brought an eye-opener impact on the Indian economy. The GDP was growing at 4.2 percent in the FY2019, the onslaught of the actions taken in the view of giving importance to lives of citizens vis-a-vis trade-off to the growth of the economy has led to GDP fall at 23.9 percent in Q1 to 7.5 percent in Q2.

The IMF projected an impressive 11.5% growth rate for India in 2021, making India the only major economy of the world to register double-digit growth this year. Moreover, the economic survey of 2020 states India’s real GDP is projected to record a growth of 11.0 percent in 2021–22 which is the highest since independence. This will be symbolic of India’s testimony of resilience, economic strength, and mature policymaking.

The cushion of this is the prudence of government actions in correspondence to nuanced details. This initiates with the early stringent lockdown implemented keeping in view India is the second-largest population country and the transmission effect is much higher in a country with a high population density. Hence, saving the human resource to the maximum possible extent. Further, the calibrated demand policies like a public investment program centered around the National Infrastructure Pipeline are likely to accelerate the demand push and further the recovery. The scheme of Pradhan Mantri Garib Kalyan Yojana for ensuring food security through the public distribution system, direct benefit transfers to widows, pensioners, and women, additional funds for MGNREGS, and debt moratoria and liquidity support for businesses. This action led to an increase in the economy’s demand as the beneficiaries have a high marginal propensity to consume. Timely proposing and rolling out of forbearance and under the Atma Nirbhar Bharat Package Government of India also launched Emergency Credit Line Guarantee Scheme (ECLGS 1.0) to provide much-needed relief to stressed sectors helping entities sustain employment and meet liabilities for MSMEs. A boost for Project Exports with the assistance of EXIM Bank A second version of the Scheme (ECLGS 2.0) was also launched to offer necessary credit guarantees for loans by banks and NBFCs to identified stressed sectors. The Atmanirbhar 2.0 and 3.0 timely increased the capital expenditure. On the other hand, supply-side policies included changes in the monetary policy Lowering of Repo and reverse repo rate by 115 and 155 bps respectively. Injection of durable liquidity through Open Market Operation (OMO), Reduction in the CRR requirement of banks, increasing bank’s borrowing limit. Privatization of PSUs in non-strategic sectors, Production Linked Incentives (PLI), ease of doing business, etc The Government has undertaken several structural reforms with a focus on land, labor, liquidity, and law that will globally position India as an attractive investment destination. Since the onset of the pandemic, it has injected over Rs. 20 lakh crores stimulus for the economy. The sectors covered include power, manufacturing, defense, land, education, mining, and minerals. India now ranks 63rd out of 190 countries in the World Bank’s Ease of Doing business 2020 report.

The approval of two indigenously manufactured vaccines for emergency use adds an extra feather to achieving the expected target. With the economy’s returning to normalcy brought closer by the initiation of a mega vaccination drive, hopes of a robust recovery in the services sector, consumption, and investment have been rekindled. Thus, giving way too many opportunities which were surpassed by the pandemic. All the fiscal, monetary, and structural reforms are paving the way for achievement.

-Tanu Goyal, Gokhale Institute of Politics and Economics