- Nidhi Rai
- BBC News
Corona infection has left the entire economy of India, including India, hanging upside down. According to a report by the World Bank, among the emerging economies which have suffered the worst of corona infection, India is second. At the same time, Oxford Economics believes that the economy that has affected Corona the most is India.
However, the debate is not whether India is at number one or second in the economies that have been hit by the Corona infection, but the question is, how did this bad condition of our economy end? How did the economy reach this abyss?
The short answer to this could be that the economy collapsed due to the corona infection and then the longest and most stringent lockdown imposed due to it and then the subsequent halt to economic activity.
But is Kovid-19 the only reason for this economic plight?
The answer is no.
The pace of the Indian economy started slowing down before the outbreak of the Corona infection. Gross domestic product i.e. GDP had fallen to 4.2 per cent in FY 2019-20. This was the lowest level in the last 11 years.
The GDP growth rate was 8.2 percent in March 2018, but it decreased to 3.1 percent in March 2020. GDP continued to decline for eight consecutive quarters.
The unemployment rate in the country reached 6.1 percent during 2017-18. The unemployment rate was the highest in the last 45 years.
Partha Rai, a professor of economics at the Indian Institute of Management, Kolkata, told the BBC, “It is true that the Indian economy had been suffering from slowing down three years before the Corona transition. Economic decisions with long-term recovery prospects like GST and The new insolvency law would have also caused some initial damage to the economy. Along with this, the worsening global economic conditions preceding the Corona transition worsened. Amidst all this, the lockdown imposed to prevent and prevent the spread of Corona infection. Demand and supply Shook both. This created havoc on the consumption front. “
How did things get so bad?
Experts believe that this condition of the Indian economy happened due to sudden policy changes made by the government. First the government imposed demonetisation in 2016 and then introduced the Goods and Services Tax (GST) in 2017.
After this, several policy changes including real estate-related RERA (Real Estate Regulation and Development) law were made one by one. RERA law was introduced in sectors like real estate, in which a large number of people get employment.
These sudden changes caused severe injury to both organized and unorganized sectors. Due to this, they were not able to come back to rhythm again.
Sunil Kumar Sinha, Principal Economist, India Ratings and Research, told the BBC, “There have been several policy decisions one by one from the government which not only hurt the production capabilities of the economy but also affected people’s livelihood. Demand in urban areas arises only when there is a spurt in production related activities. But demonetisation and GST have a very negative impact on the unorganized sector. This sector has a significant role in generating consumer demand. But once the production track If it landed, it never reached the previous level again. It caused a huge decline in employment.
Sinha says, “The urban consumer is waiting for an increase in his income but it is not increasing. However, his liabilities are increasing. Because of this he has stopped spending money.”
Sinha says, “The expenditure in the rural sector cannot be offset by the expenditure in the urban area. Because the agriculture sector’s share in the economy is only 15 to 16 percent. The urban economy will take longer to get back on track Because production has not yet started to its full potential. “
Sinha said, “Those who can increase demand are in the bottom of the pyramid, both in rural and urban areas. In the last budget that has come, attention should be given to those who are able to get direct and indirect employment. Are the most backward. If they want to reach cash through schemes like Direct Benefit Transfer, then reach the people with the weakest economic conditions. But what did the government do? It gave huge leeway to the corporate sector, in the hope that it would Will create employment through investment. But corporate companies used it to repair their balance sheet. There is already a huge burden on the government treasury. So the government is helpless to spend. Corona to generate demand in this phase of transition He abstained from taking steps like increasing expenditure “.
Arun Singh, Global Chief Economist, Dun & Bradstreet, says, “Telecom, banking and some of the sectors connected to it have been in trouble since 2019. But Kovid-19 has added to their problems. It has added to the economy. Has created a lot of concern about it. “
People were already facing sluggishness in the economy and now are facing the loss of jobs and pay cuts. They have an uncertain future. Worries about the future have stopped him from spending. They are thinking ten times before spending.
Singh says. “People have started taking precautions now. They are saving money. People feel that the bad days are not yet over. Until 80-90 percent of the people are vaccinated, the situation will remain the same. Second big The concern is about employment. People have lost their jobs. Even white collar employees working in offices have not received bonuses. Their salaries have been deducted. Money has not increased in the new year. Salary is reduced.
What has the government done so far?
The central government took steps at two levels in October 2020 to create consumer demand in the economy. Under the first decision, the government made some advance payment to its employees in the festive season so that they spend this money. The government believed that the money it would spend would create demand in the market. The employees were given money under LTC Cash Voucher and Festival Advance Scheme. Ten thousand rupees advance was given as a pre-paid RuPay card. These can be acquired and spent by 31 March 2021.
Interest-free loans were given for 50 years to help the states. In this, the central government will have to spend 73 thousand crores. The government can put another 8000 crore rupees in the system to generate demand.
Government should help the service sector
Experts believe that some speed has returned to manufacturing. But the service sector needs the government’s help immediately.
Crisil’s Chief Economist DK Joshi says, “The manufacturing sector is back on track and is now moving forward. But the demand in the service sector has not yet increased. This sector is suffering the most. The recovery in the service sector is long. It will take time. The service sector needs help as it is not stuck in this problem with its mistakes.
Joshi says, “The government should also help the people of the lower income and middle income groups. This section, especially those living in the urban areas, need help. The government should provide an increase in the income of these people. They should be given cash. Can also be given. However, the income of high earning people has been good. “
Economists are very stressed that the government should spend more. This may increase the fiscal deficit, but it should not be a worry at the moment.
Arun Singh, Global Chief Economist at Dun & Bradstreet, says, “The government should start investing. It should not worry about increasing fiscal deficit at this time. It should give money to the people so that they can spend it directly.” This will increase consumption. The government must take steps to increase investment and consumption-based demand that have an impact on the entire economy. It takes time to get the economy back on track through policy decisions. The economy needs cash immediately. “
So far, the government is trying to set such an environment in which other people spend and increase demand. But this time they have to do it in their own way.