Building A Resilient Economy

Context: Pandemic brought Indian economy to rock bottom, however recent green shoot in economy entails the strategic role of public investment for resilient economy.

 Swift economic recovery

• V-shaped recovery: India’s economic growth has surged to 20.1% in the April-June quarter, despite a devastating second wave of COVID-19.
• Encouraging growth prospects: According to UNCTAD, Trade and Development report global growth to hit 5.3% in 2021 while for India it will be 7.2%.

Challenges ahead

• Second wave disruptions: The severe and broadly unanticipated second wave of the pandemic hit the country in the second quarter, on top of rising food and general price inflation, forcing widespread lockdowns and drastic consumption and investment adjustments. It’s impacts need to be accounted.
• Income recovery remains weak: An expected growth of 7.2% in 2021 is still not sufficient to regain the pre-COVID-19 income level.
  • Cutting wages to boost competitiveness can dampen growth as wages are critical source of demand and their growth.

• Deceleration as stimulus moderates: Economy is likely to experience a deceleration of growth to 6.7% growth in 2022. Beyond that, and even assuming the pandemic is fully under control, the situation is looking increasingly precarious for many emerging economies.
• Broader challenges: Mitigating the threat of global warming whilst simultaneously addressing the inequities and fragilities of a financialised world.

Way forward

• Implement temporary suspension of the World Trade Organization TRIPS waiver: Which is considered as a necessary step to enable the local manufacture of vaccines in developing countries.
• Addressing climate challenge: Significant scaling up of resources is required from international community under commitment to common but differentiated responsibilities.
• Domestic policies towards a robust public sector with resources to make the necessary investments.

• • Accord significant role to public banks, break up and guard against the emergence of mega banks and exercises stronger regulatory oversight to discourage speculative excesses and more likely to deliver healthier investment climate.

• Out of box approach is necessary to build healthy, diversified economy with strong industrial policy focussing on building digital capacities.