Editorial

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

In search of economic revival

At last, there is some good news on the economic front. A year after the Covid-19 outbreak wreaked havoc not just with Indian lives but with the country’s economy, Bibek Debroy, chairman of the Economic Advisory Committee, recently announced the worst of the pandemic’s effect on the economy was over and positive signs were coming in of a general recovery. Maintaining that real growth comes from four sources – consumption, investment, government expenditure and net exports, Mr Debroy, however, sounded a note of caution about the uncertainty surrounding growth in the external sector. Hence, real growth has to primarily come from consumption, investment and government expenditure. Happily, the Union budget for the coming fiscal, presented by Union Finance Minister Nirmala Sitharaman a month ago, drives reforms on all three counts.

The Union Finance Ministry has pointed out that economic activity in the country has gathered pace and the current fiscal year ending March 2021 could end better than projected in the second advanced estimates of GDP released over a month ago. The mild rise in Covid cases has not dented the steady uptick in consumer sentiment, which has been bolstered by the nationwide inoculation drive. The positive growth in Q3 of the current fiscal – which is the first time since the onset of the pandemic – gives strength to the hope, as the year draws to a close, of a V-shaped recovery of the economy.

The Central Statistical Office (CSO) had estimated an 8 per cent contraction in GDP in FY2021. Based on GDP data for the first nine months, this would mean an 11 per cent contraction in the current quarter, not the full fiscal year.

According to the Finance Ministry, GDP growth is expected to be in positive territory in the second half of fiscal 2021, on the back of higher government expenditure, moderate contraction in private consumption, and new employment picking up pace.

Of course, the government has its own reasons for its expectations, while economists may look at the situation differently. Economic experts feel the Indian economy was already under severe stress on account of global trends and the negligence of the Modi government on the economic front. Covid-19 administered a further, and heavy, blow which will need concerted, imaginative and effective measures to reverse. After all, a huge 23 per cent drop in GDP presents a dismal picture. The economic downturn is not just a numbers game for experts to analyse and deliberate on. It also implies the annulment of years of growth. The shortage of cash flow, the disrupted supply chain, the unemployment rate at a historic high, suspended exports and the labour crisis are all manifestations of the detrimental impact of the pandemic and government negligence on the overall economy.

Of course the government has taken several measures, most notably ‘Atmanirbhar Bharat Abhiyan’ – an initiative to promote a self-reliant India, which can go a long way in giving a boost to economic revival. Fortunately, the country has got a bonanza in the form of a huge inflow of foreign direct investment as global funds seek out India due mainly to its political stability.

What is now needed is measures to boost the pace of revival. The focus on core sectors like agriculture, healthcare, education and IT should be prioritised and the policy framework needs to be reworked to reduce bottlenecks and hasten decision-making. For example, the agriculture sector is under-tapped. Clearly, this not the time for the government or the political opposition to score political brownie points. The need of the hour is to invite all-round participation in contributing to the betterment of the country.