Now to Put Up a Firefight

CONTEXT: With the recent estimates suggesting a sharp decline in the Gross Domestic Product (GDP), the need to recreate growth in the mid-term should focus on key sectors that contribute the most in the GDP.

Challenges to Indian Economy:

• Declining GDP: with 23.9% contraction, India’s potential growth recession is projected to be around 6-10%. - Ministry of Statistics and Programme Implementation’s (MoSPI’s) GDP Data.
• The crisis of migrant workers: Returning to their hometowns, exposing an economy that was both shallow and lopsided.
• Shallow and Lopsided nature of economy: is exposed due to the pandemic and resultant lockdown.
  • Top 100 districts, consisting of 77% of COVID cases, are responsible for 50% of India’s GDP.
  • The north and east of the country home 52% of India’s population, contributing only 30% to the national GDP.

Opportunities showcased amid crisis:

• Provision of Safety net: with smart, direct benefit transfer highlighted the government’s targeted approach.
  • For, E.g. While the Micro, Small and Medium Enterprises were visibly hit, the government provided early relief.
• Societal Resilience: shown in the form of resolve of the front line workers.
• Decentralization, with the use of digitization, was a visible theme impacting many sectors.
• Agriculture Resilience: providing a respite with a 3.4% growth this last quarter.
• India’s ‘full potential’ can be an average of 9% or more.

Way forward:

• Recreating growth in the medium term is likely to come across ten key sectors constituting most of India’s GDP.
  • Dormant resources should be put to use, requiring a special focus on balance sheets.
• Reconfiguration of organizations by all segments of employees, for revival and growth, since no single organization can refill the economic lake of the country.
  • For, E.g. corporate sector must realize that its interest in the economy cannot be biased by its focus on metropolitan and Tier 1 districts.
• Targeted investments by governments in digital and physical platforms deeper and wider will be an important component of the revival approach; This will be helpful in :
  • Creating employment in the right locations,
  • Critically building enabling capabilities in society.
• Enhancing the reach of the corporate sector in the economy:
  • Corporate sector must realize that its interest in the economy cannot be biased by its focus on metropolitan and Tier 1 districts.
  • Using technology stacks — like the Unified Payments Interface (UPI), companies can go deeper into the economy, increasing India’s economic volume and productivity.

 Conclusion: By shifting to a ‘full potential’ trajectory starting in 2022, over the subsequent decade, we can pull ourselves out of this mess.