The coronavirus pandemic has no doubt dented the economic growth across the globe with large economies like the UK and USA falling into technical recession and India is no exception. It is being predicted that India will witness a sharp V shaped recovery post-covid. However, it's easier said than done. To achieve this, it is essential to prevent permanent damage to the fundamentals of our country's economy rather than superficially treating the wounds.
Compared to a month back, Indian administration has managed to drastically reduce the uncertainty revolving around getting back on track with the massive vaccination drive. That being said, states like Maharashtra and Kerala are still grappling against a high covid positive rate per test. Leading to the fear of cases not having already peaked.
Already, Individuals earning less have held back consumption thus, reducing the spending. Uncertainty further leads to citizens who have resumed earning being extremely cautious with how they spend the money.
It is highly unlikely that India's GDP will expand this year. Most economic think-tanks are unanimous that India's economy will contract, their opinions differ only in the magnitude of contraction.
To summarise the vast array of opinions on economic revival, here are the key factors which will play a decisive role in determining the fate of Indian economy post COVID-19
DEMAND, SUPPLY, GROWTH
With the lockdown, the economic activity came to a grinding halt in India from the end of March. Domestic consumption almost wiped out. Pay cuts and layoffs, combined with fear of spread led to lack of shopping and completely eroded demand.
It shouldn't be surprising that the economic activity came to a screeching halt with the onset of the nationwide lockdown implemented to control the pandemic. As the production went down so did the incomes of the people dependent on these industries. Consequently, they spent less which eroded demand thus, making it impossible to produce as much as before. This leads to large scale lay-offs thereby, leading to a vicious degrowth cycle.
In such a case, the government should act as a promoter for manufacturing and service sectors. Stalled infrastructure projects should be renewed with contracts and the public spending should be increased to get the money in the markets flowing.
A strong comeback in secondary sector will vastly reduce the uncertainty which in turn will allow people to increase their discretionary spending. Festivals of national importance like Diwali and sales around the Independence day will be a critical dose of oxygen for the ailing funding.
JOBS AND EMPLOYMENT
The immensely adverse impact of the lockdown and the economic slowdown on job security is not unknown. Lay-offs were a commonplace scenario and in many places where employees were not dismissed altogether, their wages were reduced ultimately being pseudo-employed, a case in which the human resource is not used to it's potential.
While India's unemployment rate wasn't dropping significantly per se even before the pandemic, it will be imperative to generate rapid employment at least to the pre-pandemic levels for a smooth rebound. Public spending will again play a very important part in the same. Massive infrastructure projects must be undertaken by the Public Works Departments, both state and union.
The changing mood of industries migrating from China into countries like India and Vietnam is an excellent opportunity worth capturing. Measures like cutting through the current red-tape in industrial approvals and certifications as done by the Government of Uttar Pradesh should act as a starting point.
SMALL AND MEDIUM SCALE ENTERPRISES
The government's hard push on MSMEs since 2014 in the form of credit and monetary policy will prove beneficial in revival in this sector which has been hit hard.
The beleaguered MSMEs can expect a lenient budget in February aimed towards strengthening the micro credit system and a more inclusive no-tax bracket for MSMEs.
The ₹20 lakh crore financial package announced to tackle the adverse effects of the pandemic includes funds for multiple schemes benefiting this strata of industries.
The push towards SEZs and tax exemptions for MSMEs up to a certain limit may help with tackling the effects of tepid demand.
THE BIG MONEY SECTORS
The pandemic hasn't spared sectors involving massive sums of capitals including aviation, hospitality, fashion and tourism. Tourism and Hospitality sectors directly depend on the confidence of the citizen on the machinery- administrative and medical. The fear of mismanagement of a pandemic is enough to keep foreigb tourists astray from the country.
The revival of such sectors will be a lengthy and gradual job. While the stock market remains bullish on aviation, the same is not true for fashion and leisure industries. These sectors will ultimately have a significant impact on the overall health of the economy.
While the vaccination drive provides some hope, reopening of the country is posing new challenges including fresh micro-tides of cases. Only time will tell how long it takes to achieve normality.
When compared to wealthy countries like UK and USA, India has relatively handled the pandemic a lot better keeping in mind the massive population.
The ultimate truth is that there is no shortcut to revival or the economy and normalization of all spheres of life. Vaccines, the efficient delivery of the same and the subsequent inoculation campaign will act as a god-send.
We as citizens should still, until mass inoculation should remain vigilant, alert and take all precautions. Little efforts go a long way. Trusting the scientists, and refraining from partisan politics is the fastest route towards normality.
What is important is to learn from the crisis, further strengthen the public health system, emphasize on efficient and scientific administration.