As the country reels from the second wave of the pandemic, will the post-pandemic rebound help revive the Indian economy?
“New-normal” – is a phrase that found its origin in the early 2020s and is still reverberating through 2021. The experience during this time has been one of the unprecedented need to rapidly adapt to the evolving situation, exposing weaknesses, strengths, and opportunities. There is considerable debate about the long-term impact of the pandemic outbreak on the economy, with many arguing dramatic shifts in the economy and trends. However, this isn’t the first time that the world has encountered and thrived pandemic. In fact, history offers a number of lessons when it comes to post-pandemic rebound.
- The first being although people are looking to get out and spend once the risk of contamination passes, however, some vulnerability lingers.
- The second is that crises encourage innovations and digitisation – upending the economic framework.
A Look Back Into The History
In the 1830s, although the cholera pandemic devastated France wiping almost 3% of the population, it played an instrumental role in kickstarting economic revival followed by Britain’s industrial revolution. By contrast, the 2008-09 Recession was triggered by a crisis originating from overleveraged financial organisations. The consequent drop in housing prices, increasing foreclosures and unemployment hit aggregate demand, leading to one of the major recessions of the post-war era. The recession was followed by 8 years of half-speed (2%) annual growth and ushered in a series of monetary and economic measures to revive the economy.
A Post-Pandemic Rebound In The Cards?
With restrictions being lifted and effective vaccine deployment helping control the spread of the virus, many developed nations are on the verge of a post-pandemic rebound. According to the Global Post-Pandemic Economic Recovery Report 2021 by Research And Markets, the US, for instance, will experience a 4.4% growth in 2021, with the support of the recent incentive push and new stimulus package expectations. European economies, on the other hand, will continue to withstand stress from re-imposed lockdowns. Whereas in the Asian counterpart, China will see 8.0% growth in 2021, while India will experience a 10.9% growth in FY 2021-22 – the growth rates are reflective of the low GDP base effect from 2020 to an extent.
On the domestic front, although the 2nd wave of the pandemic translated into massive humanitarian impact with severe disruptions, India’s GDP data indicates a strong rebound, following a contraction last year of 7.1 %.
The International Monetary Fund (IMF) raised its growth projection for the Indian economy to 12.5% for FY 2021-22, while the GDP growth for FY23 pegged at 6.9%, the highest among emerging and developing economies.
What Policies Are Required To Accelerate Growth?
The government should implement a multi-pronged mechanism.
- Effective and aggressive vaccination deployment to reduce the spread of the virus and provide breathing room for healthcare organisations.
- Although the budget came along with some fruitful announcements pertaining to investment in the infrastructure sector, close monitoring to fast track the infrastructure investment, including in rural areas, can help in economic revival.
- Third, the creation of safety nets under the MGNREGA for informal workers and other vulnerable sections, including MSMEs in the form of monetary support, will help provide support.
2020 was, undoubtedly, an incredibly challenging year for the worldwide economy, with lockdowns, sharp economic contractions, a higher unemployment rate, and supply chain disruptions. However, as the world awaits to revive from this game-changing crisis, there’s clear accountability to bounce back stronger, more resilient and sustainable than before. Going forward, economic recovery will be the keyword reverberating in 2021 in the light of the lifting of restrictions, inoculation programmes, and demand-side revival. The worldwide growth is expected to accelerate. The speed of recovery is required to be a lot more grounded for developing and advanced economies.