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The COVID-19 pandemic has resulted in a disruption of trade as well as market linkage across the globe. The responsible of various countries have been observed in the form of a structural shift from participating in global supply chains to looking inwardly. Lockdown of the economies affected global supply chains by halting the process of production and output. The IMF (International Monetary Funds) projects a comeback by 2021, where the optimism is located in the growth potential within South-Asian economies. Now we will tell you the ways to revive the Indian economy.
1. Government driven expenditure to increase consumption-led demand
The growth factors such as private investment, consumption and exports are not resulting in positive so the bonus to induce the revival lies with the government-driven expenditure that will inject money into the system and bring back the confidence of the private sector. The investment in building resilient infrastructure, which is not only futuristic but also green and could address multiple problems such as massive scale unemployment, reduced consumption-led demand, liquidity crisis and environmental challenges. The announcement of the National Infrastructure Pipeline (NIP) is an important step to stimulate the progression.
2. Resetting Fiscal deficit
This function is perfect when the government can manoeuvre to reset its federal fiscal deficit target to around five per cent of GDP (Gross Domestic Product) and gradually bring it to approximately 3-3.5 per cent over the next two to three years. This will help to solve the immediate liquidity crisis considering that in the present situation, the direct and indirect tax revenues would falter due to the slowing down of industrial activities. The decision may cut to a short term inflationary pressure. Though, the liquidity struggle still prevails at the federal level may well be averted which might be a huge trap to evade.
3. Core sectors prioritization
The focus on core sectors that can trigger strong growth stories such as Agriculture, healthcare, education and IT, etc. should be prioritized, and the policy framework needs to be reworked which allows swifter movement and reduces the bottlenecks. The Indian agricultural sector calls for structural reforms rather than temporary corrections. In the same way, the healthcare sector also requires a priority approach by the government, including the robust infrastructure and policy focus on components like improved primary healthcare, digitization, last-mile reach, etc.
4. Reinforcing the rural development
A few months ago we observed a considerable migration of the workforce back to their native homes. Rural India propounds a viewpoint to build back better. Rural Infrastructure needs to be strengthened that can spur the growth of agro-based industries and get better access to markets for farmers, creating job opportunities for the rural population, improving the purchasing power, decongestion of cities, boost to the MSMEs and promote entrepreneurship with innovation. It won’t be an overstatement to make that Rural India holds the role to bounce back.
5. Capitalizing on the anti-China wave
The COVID-19 pandemic has brought a robust anti-china wave globally, which also led to the exploitation of India on this positioning. The bureaucracy should work hard and provide a conducive environment for international companies to establish their base. Reforms like rationalizing land acquisition and labour laws, logistical and trade facilitation to curtail the transaction costs are some of the factors that may lead to FDI (Foreign Direct Investments) influx. By enabling the survival of startups, small and medium businesses will provide them with financial assistance and deferring tax liabilities can potentially accelerate the growth as the informal sector employs a considerable population and the COVID has damaged it severely leaving no scope to turnaround. Also, modern business models such as waste management, green development, innovation in the education and energy sector should have provision for small scale business to participate. Lastly, if the vaccine is available for the masses soon, then the economy may experience a faster economic revival and fancy the chances of a V-shape recovery.