Hyderabad: India today is undergoing an unprecedented health emergency due to COVID-19, impacting the lives and livelihoods of its billion plus population. Like any other country, India too resorted to an inevitable lockdown to prevent the spread of the disease, in the absence of a vaccine to treat it.
After bringing the country to a grinding halt for 54 days and counting, it could slow down the doubling time of number of Corona positive cases, relative to the rest of the world, including some of the industrialized nations.
However, it came at a huge economic cost that the country had to pay in terms of lost output, employment and incomes. The United Nations projected that Indian economy would grow at 1.2 percent in 2020, while it grew at a rate of 4.3 percent and 6.8 percent during 2019 and 2018 respectively.
On the other hand the estimates of the Centre for Monitoring the Indian Economy (CMIE) suggests that 114 million jobs were lost in April 2020 and what is more worrisome is the fact that 27 million of these jobs were lost by the youth falling in the age group of 20-30 years.
“The Package”: Some Concerns
Given the economic suffering that the country is undergoing, the ruling dispensation had come out with a massive package of Rs.20 lakh crore. It was basically a combination of measures assuring liquidity by making enough cash available in the banking system and providing government guarantees to the loans that banks provide to a variety of stakeholders from MSMEs to street hawkers.
On the other hand key reforms related to agriculture, industry and ease of doing business are brought forward besides focusing upon the much needed agricultural infrastructure. Last but not the least gates are widened for the entry of private sector in PSUs too.
All the policy measures that the Finance Minister announced in her series of press conferences are to be welcomed as they have the potential to make India self-reliant to a large extent in the medium and long run. In fact these reform and liquidity measures, if implemented in letter and spirit, could address some of the fault lines that had slowed India’s economic growth, even before the country came under the influence of COVID-19.
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However the main concern at this point is that, despite a huge package, there is still a larger scope left to address the more pressing problem of the day, i.e, the revival of aggregate demand in the economy.
The basic reason for a dip in economic growth and a spike in unemployment numbers is the lack of demand for goods and services in the economy.