Viewpoint: Rebooting the economy

25 OCT,2020 | MEDC


 

The Finance Minister has wisely kept open the option of another fiscal stimulus for the current financial year. It would be primarily in the way of increasing government expenditure in the economy. By all accounts, India is gradually succeeding in flattening the Covid curve, and rebooting the economy now has to get topmost policy priority. The RBI has also said that it will use all available tools at its disposal to aid the revival process. The finance ministry has announced two stimulus packages totalling about 1.5% of GDP – the Atmanirbhar Bharat Yojana in May and the latest one last week, wherein interest free loans will be given to states for capex and extra budget will be provided for a central capex. Despite what critics may say, these are steps in the right direction, providing the required push to the economy in these stressful times. In India, the biggest challenge always lies in the implementation of policy. Even though liberal amounts have been provided to push forth such capital expenditure that has a multiplier effect, a lot will depend on how things shape up at the grassroots level … whether individual departments that are responsible for infrastructure spending actually do so. Withtechnology adoption in all spheres of the economy skyrocketing due to Covid-19, India needs to focus strongly on sustained infrastructure development. Policymakers need to strike while the iron is hot. Of course, with preparations being on for the next year’s budget, it is likely that any new policy measures will be fiscally neutral. In much of the private sector at least, digitization has got a push thanks to Covid. An increasing number of enterprises are seen to be moving decisively on their journey towards a digital transformation. This trend should be nurtured. Cloud-related acquisitions are becoming increasingly common. Companies are competing to build capacity to support remote work, and maintain business continuity amid widespread physical disruptions in the workplace. For many white-collar workers, work from home is going to become a reality in the foreseeable future. The overall impact on the economy due to this paradigm shift is not yet too clear, but with the right infrastructure in place it should be positive. Rebooting the economy needs to be a collective endeavour involving both the public and the private sectors. A strongtechnological focus – including the use of artificial intelligence – will help drive inclusive and sustained growth. The green shoots of recovery are already becoming visible everywhere. A steady recovery in manufacturing is helping India climb the rankings amongst emerging markets. However, we have to be careful as a pickup in the virus again during the festive season could undo many of the gains made in the recent past. Rather than believe that crisis begets radical reform, we need to constantly keep upgrading our systems, so that nothing can take us unawares.

*Photo Credit: Google

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