Editorial

Published: Dec 29, 2021
Updated: Dec 29, 2021

Sick economy needs strong stimulus

India’s economy is facing an unprecedented crisis. In the last decade or so, no proper attention has been paid to build an economy that ensures employment to all, adequate per capita income to maintain a family, and welfare schemes to take care of the masses. In fact, matters have worsened in the wake of the Covid-19 pandemic, prompting the government to come out with a series of economic stimulus packages since the nationwide lockdown was imposed on March 25, 2020. The nationwide closure had administered a body blow to the pace of economic growth, rendering millions of people jobless and making the life of the common man miserable.

Economic parameters tell a grim tale. The latest GDP figures released by the National Statistical Office paint a grim picture of the country’s economy, exposing the government’s ineptitude in not just handling the economy but also the pandemic. The annual GDP growth, which touched a high of 8.3 per cent in 2016-17, has recorded a negative growth of 7.3 per cent – making it the first time that India has recorded negative annual growth since 1979-80. An annual nominal GDP that stood as high as 13.8 per cent in 2012-13 now stands at – 3 per cent. In fact, even before the pandemic, the GDP growth rate had started to fall as a result of the unwarranted and illogical more to demonetise high currency notes in 2016 – a step which was rightly described as “organised loot and legalised plunder” by Dr Manmohan Singh. Unfortunately, this wrong step, followed up by half-baked implementation of the GST regime in 2017, has compounded the economy’s woes.

Though the government took solace by arguing that the drop in the Indian economy was much less as compared to other countries, the argument is baseless and incorrect. In fact, the GDP growth rate in the US during 2020 was — 3.5 per cent, in Germany 4.9 per cent, in France -8.2 per cent in China, 2.3 per cent in Japan -4.8 per cent and in India it was actually — 7.3 per cent. Again, India’s per capita GDP has come down from 10.6 per cent in 2016-17 to -5.4 per cent in 2020. In fact, many countries, including Bangladesh, have overtaken India in per capita GDP terms.

During the pandemic, people in India suffered not only on account of job losses and reduced incomes but their woes were multiplied on account of a steady and sharp rise in prices of essentials. Ironically, the government, which was benefited greatly from very low prices of crude oil in the first three years of its regime, turned a deaf ear to the common man’s woes when the spurt in crude oil prices led to fuel prices hitting a century throughout the country. Rajya Sabha MP Priyanka Chaturvedi has quipped that when crude oil prices slumped, the PM was supposedly ‘naseebwal’ (fortunate), but he did not bother about the bad ‘naseeb’ of the people when fuel prices skyrocketed.

Thanks to Covid-19, unemployment in the country is on the rise and it is estimated that 125 million people have lost their jobs during this period.

When governments the world over gave strong doses of stimulus and liberal income transfers to help families and boost the economy, the India government was doling out miserly packages. The Prime Minister announced an ‘Aatmanirbhar’ package that would be 10 per cent of the GDP, but when the Finance Minister spelt out the details of the package, it turned out to be barely one per cent of the GDP. Compare this with the package of 10 per cent of the GDP in the case of the US, 16 per cent in the case of Malaysia and a staggering 20 per cent in the case of Japan! The pandemic has not only ravaged the Indian economy but has exposed the perilous state of the health infrastructure in the country.

What the country needs now is a very strong dose of economic stimulus and a booster dose of demand-side economics. It also needs a set of policies to deal with bottlenecks, and additionally more infrastructure investment by the government.