The budget for 2021–22 is important for three reasons. First, it provides a reality check on the government’s attempt to keep up public spending in the wake of severe contraction in revenues and expansion in expenditures needed to save lives and livelihoods. Second, it shows the large increases in deficits and debt in the already prevailing stressed fiscal environment. Third, as the economy was already slowing down even before the pandemic due to structural factors, it attempts to provide reform signals to reclaim the earlier growth trajectory. While it has tried to prioritise growth, there is considerable risk from burgeoning deficits and the possible impact in price stability from large liquidity infusion to facilitate government borrowing at low cost that is likely to occur. The reform proposals are important, but the test lies in how effectively they are implemented.
Why was India’s growth slowing in the run-up to COVID-19 and how much fiscal space was used to stem the slowdown? What is the nature of India’s economic recovery from COVID-19? How does the budget seek to balance fiscal support while reducing the deficit? What was the underlying fiscal impulse in the COVID-19 year and what is it budgeted to be next year? What are the implications for debt sustainability and fiscal–monetary coordination? Finally, what are some paradigm changes the budget seeks to embark on and why is execution so crucial this time? This essay seeks to answer these questions to make sense of growth and fiscal dynamics in a post-COVID-19 world.
The Government of India has rolled out new rules to restrict third country imports routed through free trade agreement partners for availing preferential tariff benefits. However, the regulatory and compliance-related burdens of the new rules will burden both import-dependent and value chain led export-oriented sectors, and make them uncompetitive in global markets.
The Reserve Bank of India’s loan repayment moratorium, announced at the end of March 2020 and extended to 31 August 2020, was conceptualised and implemented as a COVID-19 crisis-response measure. While the moratorium ended, the crisis has not. Findings from a survey of 1,452 rural microfinance clients in Maharashtra, conducted in July–August 2020, show that a critical majority of borrowers continue to experience significant income deficits, and will not be in a position to service their debts for the foreseeable future.
Punjab’s economy, including its agriculture, has been in crisis for some time on various fronts. But the pandemic provided an opportunity to the state government to set up an expert committee to suggest measures for rolling out a medium- and long-term strategy for the revival of the state economy. This article provides critical commentary on the various recommendations of the committee to deal with the agrarian crisis and presents an alternative perspective.
Income and consumption growth rates vary for different income groups. Data shows that beyond the headline gross domestic product growth rate, there is a significant heterogeneity in growth rates depending on which part of the income distribution one is located in.
Crude oil price becoming negative is one of the rare events that happened after World War II in the energy sector. The real reason for oil prices to move into sub-zero level is not attributable to supply–demand mismatch, rather it owes to the timing of this movement and specifically what is popularly known as the “day-of-the-week effect.” Though India is importing almost 82% of its oil, falling global crude oil prices are not going to benefit the end users much. But, the interaction effect of the lower crude oil price with COVID-19 is definitely going to have an impact on the country and investors.
Although agricultural start-ups in India took a hit due to the COVID-19-induced lockdown, they have enormous potential in aiding economic recovery. A survey of 162 start-ups from 29 states, located in 98 cities, reveals that many start-ups have tailored their products, modified their technologies and invested in their long-term growth potential, even as they suffered from liquidity crunch, lack of investor funds and poor demand. The government should provide capital access, market access support and end-to-end solutions for innovation and marketing towards harnessing the power of these start-ups.
How can India's economy grow in the midst of a pandemic, without compromising the health of the working population and aggravating the transmission of COVID-19?
