The crisis around our economy was visible even before Covid 19 began its presence. The GDP growth was on a fall from their respective previous years, 8.17% in 2016, 7.17% in 2017, 6.98% in 2018 to 4.1% in 2019. This was a clear indication of either a faltering economy of India, as a standalone nation, or a global recessionary trend. The faltering economy was not restricted to India alone, as most countries around the world reported a slowing down of the economy.
The Covid 19 was a perfect fuse to trigger and ignite the scenario, with industries shut and half the humanity in various stages of lockdown. The World economic growth could shrink in 2020 around 3%, and it is naïve to expect that India, in the top 5 economies would be unaffected or least affected.
Our population is high, and so are the numbers of poor, who have been dislodged from their work and their homes. The Government swung into action, just a day after the lockdown was announced, announcing the Rs.1.70 lac crores assistance to the poor and the farmers, to women and the seniors. Three months of cash assistance and free rations are being provided to the poor all over the country.
Soon the Government followed with announcements of reduction in Reverse-repo rate, now down to 3.75%, thus enabling the RBI to borrow from the commercial banks for onward lending to the Government. The struggling NBFCs needs were quickly addressed too. As the icing of the cake, the PM announced a Rs.20 lac economy package yesterday with a focus on Land, Labour, Liquidity and Laws, which must be welcomed by all.
No wonder the vociferous economists from the opposition demanding a package until yesterday have all gone under hiding. India is not the only one to open its purse strings. Japan has provided 21.1% of the GDP as a stimulus package, the US 13%, Sweden 12% and Germany 10.7%. India, with its commitment of $260 Billion, is the fifth in the ranking.
India’s stagnant economy had one blessing. The inflation has been manageable in the recent past at 4.86% in 2018 despite the previous year it was 2.49%. With the prediction of a normal monsoon, we may not face high inflations like during the five years, 2009-10.88%, 2010- 11.99%, 2011-8.86%, 2012-9.31% and 2013-10.91%. Such alarming figures are not limited to these years alone.
Increasing the money supply is a relevant feature in a recessionary economy. When the US Government, in 2009, refinanced failing banks and mortgage companies, it was termed immoral by many. The daring interventions helped in preventing contagion and helped their country regain its shape in the following years.
First, there was a cry, where’s the package? Now, the call is, where will the Government find the money? These social network economists may not know that in extreme cases, the Government is entitled to borrow and spend. The Government can print bonds, which the RBI can buy. The Government can earn back in taxes and revenues and can redeem the stimulus amount in six/eight years.
The opposition must objectively criticize, but not dismantle nation-building. The choice is ‘Now or Never!’
Jai Hind!
Sampath Kumar
Intrépide Voix
