New Delhi: Fiscal and monetary policy measures used by the government will not succeed in reviving the country’s economy unless medical science finds an answer to the Covid-19 virus, said a top economist.
Prime Minister Narendra Modi’s government last month announced a Rs 20 lakh crore package to make India self-reliant (Atmanirbhar Bharat) and to revive the economy after the global pandemic brought the economic activity in the country to a grinding halt. This week, the government started opening the economy under the unlock 1.0 phase following four rounds of lockdown that stretched from March 25 to June 7.
However, economists like Sunil Sinha believe that the adverse impact of Covid-19 on the economy will continue to persist.
“Even while the lockdown is being lifted and there is a tendency to move towards normalization. The fact of the matter is that the answer to this problem does not lie either in fiscal or monetary response,” said Sunil Sinha, Principal Economist of India Ratings, a Fitch Company.
He says unlike the earlier recessions of 2008 and 2018-19, present global economic slowdown has not been caused by a problem in the financial market or some other sectors of the economy.
“The situation has emerged mainly because of the medical reasons. So long the answer to this problem is not found by the medical science, the adverse impact of Covid-19 will continue,” Sunil Sinha told ETV Bharat.
“The answer lies in the field of medical sciences,” he said.
Fiscal, Monetary policy tools can’t solve the problem
The top economist who has closely tracked macroeconomic issue says the government does not have any option except to try to minimize the loss to the economy.
“I don't see how fiscal and monetary policy can answer something which purely falls into the domain of medical science,” Sinha said.
“What government or the Central bank can do is to only minimize the adverse impact of Covid-19 fallout. They really do not have an answer to all the problems that arose because of the Covid-19.”
“Some sectors will be revived but to expect that everything will become normal then it will not happen till medical science finds an answer to the problem,” Sunil Sinha noted.
Another lockdown will negate the impact of financial package
Although medical community and scientists have frantically been trying to find a vaccine or antidote for the highly contagious and deadly virus that has killed over 4,10,000 people in the world but no breakthrough is in immediate sight.
Indian scientists and researchers have also been relentlessly working on a vaccine as the number of the confirmed corona cases have seen steady rise in the last week.
According to the worldometer, the total confirmed cases in the country have already crossed the mark of 2,73,000 cases on Tuesday, making the country the sixth most affected country in world after the US, Brazil, Russia, UK and Spain. On an average, nearly 9,000 or more new cases have been confirmed in the country on a daily basis in the last few days.
“If the graph once again starts rising then there might be a need for another lockdown. If another lockdown becomes necessary to save lives then the stimulus package will lose its meaning,” Sunil Sinha said.
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He says even if the government provides another round of fiscal stimulus to support the economy, as indicated by Anurag Thakur, minister of state in the finance ministry, it will also not work if there is no breakthrough in the medical field.
Prime Minister Narendra Modi’s government announced several measures to reduce the pain of the common man under the PM Garib Kalyan package. It also announced that it will bear the cost of employer’s EPFO contribution to protect jobs and asked companies not to retrench people.
“How long you can go on with this kind of measures to see that employment is protected, people are not thrown out. Because you are trying to seek an answer for a problem the answer for which doesn't lie in the realm of either fiscal or monetary measures,” Sinha said. “It lies in the realm of medical sciences.”
“If the medical science finds a vaccine by September and vaccination starts by that time then people will return to work, investment will begin and the economy will start turning around in no time,” he said.
(Article by Krishnanand Tripathi)
