The economists said that in an economy that is retrieving from the first wave of the covid-19 pandemic, the supply-side difficulties eased during the January-March quarter while demand was quiet breakable. As India once more takes efforts to re-boost the economy and the demand difficulties want to be labelled while policy-makers sculpt out plans. The Chief Economist of Care Ratings, Madan Sabnavis pointed out that the government should expend capital expenditure instantly to stop the economy from sliding more. The Chief Economist and Executive Director of Anand Rathi Shares & Stock Broker, Sujan Hajra said that excepting a serious third wave, the steps of economic retrieve would be more dependent on demand.
And the second wave reduced the consuming power of households as jobs dropped to 15 million in May as per the Centre for Monitoring Indian Economy (CMIE). The unemployment rate soared to 11.9% from 8% in April. It needs to look at higher consumption and investment also. Right now with the pandemic hitting many families, the power of expenditure has come down. Also with several deaths recorded, families will move to pierce back on discretionary expenditure. Therefore a push from investment by the government is required. The Visiting Faculty of Center for Development Studies R Nagaraj said that, too, put forward an increase in government expenditure. He added that its first task should be to help the consumption and living means of the poor by an enormous growth of government current expenditure by never minding the increase in fiscal deficit for some time being. And such an attempt will replace household consumption demand and consequently boost the output.
Deepthi Mathew, Economist at Geojit Financial Services pointed out, RBI having done its role throughout 2020, may now be the period for the government to move in again. And consumption is the main source of the Indian economy. That is the centre should be on bringing back the consumption demand in the economy. The second wave of the pandemic created a degree of uncertainty in the economy. So the government should step up as there are demerits on the RBI to declare any further stimulus measures.
During the period of January-March, the domestic economy was running at the best pace since the pandemic started. High-frequency indicators were implying normalisation picking up steam with re-opening at full panic. Despite this, the demand-side also had some difficulties. Government spending lasted a key driver, adding 2.7pp to GDP figure. Keeping out government expenditure, GDP shrinks by 1.1% on-year, while excluding agricultural operations, would take that to a sharp 1.8% on-year reduction.
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