As we rejoice our ‘freedom’ from the lockdown, we ask the key question- are we at the ‘beginning of the end’?
Amid the already dysfunctional economy a global recession is imminent. Technically India may escape recession but endure collateral damage, wiping out the momentum of the last decade.
We have been under this fog before, not this aspiring generation though.
Economic landscape is craggy
Our economy is fragile, precariously brittle and susceptible to any long-lasting socioeconomic implications. 50% of workforce in the unorganized sector lives on sustenance. The consuming class, consisting of the poor and middle class is vulnerable and cash strapped.
The ‘centralised’ planning unfortunately aided economic concentration at the cost of economic integration and development; richest 7 states contribute about 65% to the GDP.
Ashad mah set in early, prolonged
The economic structure is lopsided; value at the top and volumes at the bottom, unlike a ‘balanced’ pyramid. The economic activities and spends are ‘lumped’, with crop cycles, elections and festivals driving spending and inauspicious period delaying purchase.
And yet, this very nature of fragility places our economy for a quicker rebound.
India is consumption led. Demand creation is low ‘hanging’ because propensity to consume is high, the consuming class at an inflection point; a potent combination and aiding the multiplier. The deprived and the poor consume (not save), helping demand growth and a quicker economic turnaround.
On the supply side, most of India’s workforce driving the economy is underpaid, ‘flexible’ and ‘easily’ employed, accelerating the job recovery. Government is a big actor, has resources and can spend. Demographic structure is the fulcrum, underdeveloped and unpenetrated market provides the base for a quick revival.
This and more, support the recovery velocity.
However the policy makers must not be misled and rejoice. More is needed, and holistically.
The shape of the recovery V-shaped (sharp and sustainable), U-shaped (or turbulent), W (double-dip recession) or worst case scenario L (depression) is important, but the ‘area’ under these shapes count more.
Area, not the shape of curve is key
The trajectory and area, not the velocity of revival should be the real pointer for the policy makers.
Lockdown has crippled the economy and impact potential growth. The government needs effective templates. It must induce significant & ‘expansionary’ measures, to augment demand, build consumer faith and suppliers’ confidence for revival.
Mis-targeted, un-implementable stimulus package will subtract value. Businesses are tight fisted in a slowing economy and don’t invest. The government has to lead investment and loosen the purse strings and spend, for recovery. Today.
Fortunately fiscal health is rosy. Falling crude price insulates us.
As we enjoy the ‘freedom’ from the lockdown a secondary impact of the pandemic is imminent, once again triggering the Sophie’s choice i.e. if the virus is not contained many will die, but if the containment is at the cost of the economy many more will suffer.
Thankfully the PM has ignored and dismissed the jibes of those ‘cure (lockdowns) was worse than the disease’ camp.
Blunt & smart and whatever it takes
This is war.
For tomorrow, the PM should use this opportunity and the learning associated, and address the structural issues by laying new tracks that ‘reaches’ ignored destinations.
He must ‘call for action’ and ‘build from start’. Focus on impact and sustainability.
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