Can A Rs 20-Lakh-Crore Booster Dose Put Pandemic-Hit Indian Economy On Road To Recovery?
Size matters. Or does it? It depends on which side of the fence you are on. Ask the government, and it contends that it has unleashed a cocktail-combination of highly-effective economic drugs to ensure immediate and efficient recovery. Talk to the opposition, and it claims that the grandiose policy package is a case of too little, too late. The fact is that none of them stand on firm ground because this is the worst crisis in a century. None of us have seen something like this before; hopefully, none of us will in the future.
One of the points of contention is the quantum of money that the policy makers say that they have injected to kick-start the economy—Rs 2,000,000 crore, the fifth largest among all the nations. The second point of debate is the mix. Is it a judicious blend that has enough stimuli to drive up the knocked-out supply of goods and services, and pull back consumption that’s down in the dumps? Finally, there is the question of timing—is this the right time to push through big-bang reforms down the dying system’s throat?
Contradictions prevail. The government opened the pipeline to help businesses to access capital easily. This works only if the banks are willing to part with money, and the borrowers are ready to use it. The Centre hiked the expenditure on income schemes like MNREGA. States forced workers to accept conditions that include lower pays without bonuses and overtime. This is in a situation of overwhelming unemployment. Reforms yield desired results during boom times; they lead to more pain during crises.
Is Size of Stimuli Suspect?
One has to remember that the COVID-19 crisis is more expansive, vast, and unknown than the previous ones. “It is deadlier and more unpredictable. The hit to growth (across economies, including India) will be higher,” feels Dharmakriti Joshi, chief economist, CRISIL. Pronab Sen, programme director, IGC India Programme, adds, “India has lost 8 per cent of her GDP, compared to a year ago.” At best, the country’s growth may be 2-3 per cent in 2020, at worst zero or negative. Like other nations, India is caught in a vicious economic whirlpool.