On 24th March 2020, prime minister Narendra Modi announced a complete nationwide lockdown. At that time covid-19 just started to show its devastating impact in many parts of the country. Eventually, it took almost six months to ease all those restrictions which had been imposed. But when GDP data came out in public, the data was far more severe than it was expected. Indian economy contracted by 7.3% which is the lowest in almost four decades. But again, this year when various renowned organizations like MOODY’S, JP MORGAN, RBI, WORLD BANK started predicting double-digit growth, the second wave took over all Indian states with more severe life-threatening impact. But this time, instead of complete nationwide blanket-ban lockdown, restrictions had been imposed by states according to their respective covid-19 condition. Despite all these harsh restrictions, prominent rating agencies predicted growth rate at higher single digit( MOODY’S forecasting at 9.3%, RBI- 9.5%).
Government’s role to sustain the predicted growth-path:-
Compared to last year, this time rural India has been hit hard by the second wave, which also left a deep hole in its economy. During the first wave, it was rural India and it’s an un-organized agri-based sector that was driving India’s sluggish growth, but this time it has been impacted heavily. Taking lessons from the previous year’s pandemic, restaurants, medicine supply chains, IT and various other services already adopted an effective online approach, which helped them to mitigate the loss up to a certain extent this time.
Due to the extra financial burden for medical expenses from covid-19, savings of a major portion of India’s strong middle class section has also taken a hit. So the best way to mitigate that risk is to vaccinate a large portion of the population. Already central government has declared that it aims to vaccinate most of the 18+ population by December. Besides that, under ‘Prime minister Garib Kalyan Yojona‘ Rs.80000 crore will be spent to provide free food-grains to over 80 crore population, which gives some relief to the lower-income class group. Last year when central government announced economic package, most of them were liquidity measures and those have long term impact in the economy. So this time government is going for more fiscal measures which can directly benefit the people. On that line budget allocation on infrastructure development for financial year 2021-2022 has got a big boost compared to last year. Infrastructure projects can generate both direct and indirect employment which can help the unemployment rate to scale-down further. Creating health-infrastructure should be the top most priority and on that line recently government has announced Rs.23132 crore for augmenting existing health crisis. Tourism sector is one of the most hard hit sector in the pandemic. To give some sort of relief ,government has recently announced to waive off tourist -visa fee of first five lakh foreign national which will serve tourism-industry better in the current financial year.
What Govt. can do more ?
Since last 6-7 months fuel price has been rising at a soaring pace, with oil-producing cartels like OPEC is not scaling up the production further. So, it will be naive to believe that the price of fuel will come down automatically. Currently both state and central have imposed heavy duty on fuel which is cutting middle-class Indian’s pocket heavily. Further due to hike in fuel price, price of various essential items is also going up which is pushing inflation further upwards . Hence, union government should reach a consensus with state to cut down the tax separately or by bringing fuel under GST. Further government can extend it’s flagship health scheme like “Ayushman-Bharat“ to cover a major portion of middle class-population. Adding further towards relief- measure, govt. can think about certain incentives for lower income groups by providing them various tax-benefits which will certainly encourage them to spend further.
The impact of the second wave of the pandemic will run deep but well-executed policy measures will help to meet the upcoming challenges and decide how far India’s rebound will go.