28 FEB,2021 | MEDC
According to the National Statistical Organization (NSO), India’s GDP returned to a positive growth (of 0.4%) after two consecutive quarters of contraction. This could be a reflection of the further strengthening of the recovery. Investment has also grown sharper than expected. After a fall in Q1, real gross fixed capital formation, recovered in Q2, and grew 2.6% in Q3. Even though the green shoots of recovery now seem to be visible, we need to be careful. Consumer spending, which is the driving force of India’s economy as it accounts for 60% of GDP, fell 2.4% in Q3. It has not recovered, despite the quarter being in the festive season. Thus, the economic revival process continues to remain fragile. Another booster for the economy is the Covid vaccination drive that is gathering pace all over the country, especially as the government of India proposes to open it up to the private sector from March 1, 2021. Our country has a vaccination strategy to be proud of – one that will allow self-registration, onsite registration and cohort registration for target groups identified by the government in order of their vulnerability to the ailment. An efficient vaccination policy will help contain the spread of the virus, and allow the government to ease lockdowns and facilitate a return to normal economic activity. According to the IMF, a successful administration of the Covid-19 vaccines worldwide will power 5.5% of global economic growth in 2021. This is not a figure that can be dismissed lightly. On the flip side, the government needs to do more to support businesses, particularly MSMEs. The single most important objective of the political economy of any nation is probably employment generation. India cannot afford any more jobless growth. China (or any other country) should not be blamed for India’s heavy import dependency. Unless we put our own house in order, it is foolish to expect the world not to take advantage of us. The government has undoubtedly undertaken some deep steps in the direction of policy reform in the Covid period, but they need to continue even as the pandemic tapers. The recent Budget was a clear reflection of the fact that this government is not afraid to be different, and to rock the boat if it aids an economic revival. With the right fiscal and monetary policies in place, we can ensure that Covid does not leave permanent scars on our economy. At the same time we need to be watchful for rising protectionism, digitization, and climate change risks that have the potential to derail the revival of economic growth. Both the public and private sectors have a unique opportunity to rewrite the economic history of India. Policymakers should facilitate the process.
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