To bounce back from the pandemic quickly, India needs a stimulus package of at least 5% of GDP that focuses on broad-based development in laggard eastern states.
In the classic Walt Disney Productions, Winnie the Pooh, there is a character by the name of Tigger. One of his most famous and oft-repeated quotes is “Life is not about how fast you run or how high you climb, but how well you bounce”. In the context of today’s economy, which is literally under seize due to the novel coronavirus, it is not about how big your GDP is, or how fast you have been growing; the real challenge is how best, and how quickly, you can bounce back to your normal growth of 7-8% per annum.
The IMF’s projections for GDP growth for this year seem to be either in negative or below 2% for almost all major G-20 countries. Within Brics countries, India may do a little better, but still below 2%. This is under an optimistic scenario, and many experts claim that India may also go into negative GDP growth this year, if it does not reboot the economy properly and in time.
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The central government, and the Reserve Bank of India (RBI) are doing the heavy weightlifting, trying to remove all roadblocks so that factories and farms can resume operations, albeit in a regulated manner, ensuring the virus is contained. The focus is largely on the supply side, i.e., how to ease restrictions, and how to increase liquidity in the system for resuming production. My humble assessment is that this may not take us far enough as the real problem is collapse in demand. And, that demand may not pick up easily as the virus is likely to stay with us for quite some time, and we may again have lockdowns as and when the viral infection surges. This will surely limit our travels and shopping for non-essentials. However, there is one demand that can easily revive, and that is food.
Source: Financial Express
