Inflation and economic revival

02 MAY,2021 | MEDC


The second wave of Covid is likely to have a greater human cost and burden on our health infrastructure as compared to the first. However, the economic impact will probably be less severe this time as the government has refrained from imposing a full lockdown. Even though state governments have imposed their own versions based on their local conditions, these are generally less restrictive than the national lockdown imposed last year. However, the possibility of rising inflation may affect economic revival. Unlike earlier episodes, this time prices are driven largely by a rise in core inflation. As predicted by the RBI, inflation could stay elevated for quite some time this year. The way out is probably for the Central government to (temporarily) loosen fiscal prudence and transfer as many resources as possible to the states, not just in cash but also in kind. What matters most at this juncture is not just protecting the economy, but also pre-empting yet another humanitarian crisis. 

*Photo Credit: Google

 

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