Indian GDP shrank 23.9 per cent, is one of the sharpest contractions in the country. This shows an alarm to all. The contraction in India compares with a drop of 12.4 per cent in Italy and 9.5 per cent in the US, two of the most COVID-affected advanced economies. These comparisons suggest that India is even worse off Country. The pandemic is still enraged in India. Since, discretionary spending, mainly on high-contact services like restaurants, and the associated employment, will remain low until the pandemic spread. The Government ensures relief becomes is very important. Like, provide free food grains to poor households, and credit guarantees to banks for lending to SMEs, where the takedown has been erratic.
Today, GoI’s reluctance to do more seems partly because it wants to conserve resources for a possible future stimulus. The strategy is extremely self-defeating because, without relief, households skip meals, pull their children out of school and send them to work or beg, pledge their gold to borrow, let EMIs and rent arrears increase. Similarly, without relief, SMEs think of a small restaurant stop paying workers, let debt pile up, or close permanently. Essentially, the patient atrophies, so by the time the disease is is contained, the patient has become a shell of herself.
The reforms can be a form of stimulus, and even if not carried out suddenly, a timeline to undertake them can increase current investor sentiment. The economic world will recover earlier than India, so exports can be a way for India to develop. For that to happen, GoI has to reverse its recent raising of tariffs so that inputs can be imported at a minimum cost. The firms will not have the confidence to invest in export production, because the economic world was that much competition.
In order to improve the competitiveness, long-debated reforms to land acquisition, labour, power, and the financial sector should be implemented, as should recently announced reforms in agriculture. India needs sustainable growth, not just to satisfy the aspirations of Indian youth but to keep unfriendly neighbours at bay. This will reflect on-demand, which will fade as India can go down to the exact level of damaged demand, partially functioning economy. Always, GoI and its bureaucrats are working so hard but they need to be frightened out of their complacency and into an effective activity.
