ASIAN DEVELOPMENT BANK HOPEFUL OF RECOVERY OF INDIA POST COVID-19
The world is in a pandemic crisis. States, Multilateral Organizations and policymakers globally are in dire need of strategies to combat and cope with this wide spread human tragedy, as well as protect their societies and economies. For many societies, the enormity of this challenge is the largest ever since Second World War. The Indian government has acted very proactively to combat the spread of the coronavirus which has made global damages beyond control.
The Asian Development Bank (ADB) forecasts weak global economic environment and continued efforts to contain the CVOID-19 outbreak. As per ADB’s Outlook 2020 – “COVID-19 pandemic jeopardises global growth and India’s recovery. Indian authorities have acted swiftly to shore up the economy hit by the pandemic. Ongoing reforms to personal and corporate taxes and measures to strengthen agriculture and the rural economy and alleviate financial sector stress will help accelerate India’s recovery.”
ADB has stated that Government initiatives introduced in the late FY 20 and FY 21 budget will aid recovery and sustain growth in the coming years. “Both urban and rural consumption will be supported by reduced personal income taxes and increased assistance to agriculture sector and rural areas. Corporate tax cuts and increased public investment in improving domestic infrastructure, including focusing on production of indigenous industries that produce medical equipment, medicines and medical facilities, will revive investment.” The merger of banks and recapitalization of state-owned banks and easy access of credit to corporates as well as small and medium enterprises will enable the firms to cope with sectoral stress.
ADB has recently slashed India’s FY 21 GDP growth outlook to 4%, from its earlier forecast of 6.5%, which seems to be a sustainable growth target. The Indian economy will prove to be resilient to this crisis for a variety of reasons.
Firstly, the Indian government has rolled out Relief Package worth Rs. 1.7 lakh Crore providing a safety net for those hit the hardest by Covid-19. This Prime Minister Garib Kalyan Scheme includes financial incentives for both poor and the marginal workers in an attempt to limit the economic damage caused by the virus outbreak and tackle loss of livelihood of millions of urban and rural workers by the unprecedented lockdown. This fiscal policy measure is complemented by accommodative monetary policy – The Reserve Bank of India has announced a barrage of relief measures to alleviate financial difficulties arising due to Covid-19 restrictions, including inter-alia, steps to boost banks’ liquidity by reducing the CRR and the repo rate. Besides, the government is also contemplating to bring out a stimulus for the MSME Sector. It has constituted task forces and is seeking suggestions from reputed economists to look at ways to restart business operations post lockdown and revive the economy.
The Indian economy is fundamentally strong for several other reasons as well. The Centre and States administrative mechanism has demonstrated immense coordination and cohesion in attacking the pandemic and its associated social impact, indicating a common and shared understanding of the country’s problems. Ground level measures taken so far, have ensured that basic supplies and amenities including healthcare, fuel, food items, education and banking continue to remain in functional state even during the lockdown. The wide spread of Jan Dhan accounts will enable faster transmission of financial aid to the needy and the migrant worker, enabling a stronger recovery in the future.
One of the greatest strength of India is its human resources. If human resources are protected, the economy can be re-built and revived. The recovery in China, albeit limited, is encouraging, suggesting that containment measures can succeed in controlling the epidemic and pave the way for resumption of economic activity. The emergency financing by banks, FIs as well as global agencies can ensure rapid support to the economic sector. India could be more favourably placed in this regard, given its friendly relationships with most countries in both developed and developing world. The lockdown is also spurring innovation in the country, which has already tried and tested new business models in the recent times. So as the lockdown is lifted, sooner or later, it is likely that the Indian economy will gear up and once again prove to be one of the most strong and formidable economies across the world.
Dr KL Dhingra