Now, rebooting economy the key
Thanks to the gradual easing of lockdown norms, economic activities across the country are now gaining traction, albeit slowly.
Thanks to the gradual easing of lockdown norms, economic activities across the country are now gaining traction, albeit slowly. Barring curbs on large gatherings and ban on public transport, aviation, malls, hotels and movie theatres, most of other sectors have been opened up. That is a big relief for people after a prolonged total lockdown to contain Covid-19 pandemic. The lockdown, which began on March 25 and has since been extend twice till May 17, crippled the economy. The easing of norms - some from April 20 and more from this Monday - has brought many key sectors back to life.
However, as per a snap poll carried out by industry lobby group CII last week, majority of CEOs felt that it would take more than a year for businesses and companies to recover. The survey was carried among 300 chief executive officers (CEOs) in India. Of them, two-thirds were from key MSME sector. As many as 65 per cent of these CEOs see over 40 per cent fall in revenues during the first quarter (April-June 2020). But as always, these CEOs are overly-optimistic. The damage to companies' revenues is far higher than what they are forecasting. Further, it will take much more than a year for the economy to come out of the mess created by Covid-19 pandemic. Nonetheless, the country's economic recovery depends on two key factors. Firstly, it hinges on how fast the country reduces the Covid-19 threat to a normal level. Thanks to the lockdown, the country managed to keep infections at low levels. But with the opening of economy, infections may go up faster than expected. Containing the second wave of infections post the lockdown is important.
The second key factor is the quantum and quality of economic stimulus package that the Centre offers. As of now, there are no indications that the Indian government will offer massive package as expected by many quarters, especially the industrial sector. The Centre seems to have its own concerns. The country's fiscal maths is not in its favour. For the current fiscal (FY21), it projected a fiscal deficit of 3.5 per cent of GDP. It would have been a Herculean task to achieve this target even during normal times. With the pandemic which sent the economy for a toss, the country will be lucky even if it keeps the fiscal deficit at the double of the projected 3.5 per cent. Of course, higher deficit may attract wrath of global rating agencies.
But these are extraordinary times. So, the Centre should put aside the fiscal deficit concerns and do whatever possible to put the economy on track. It should go for a massive stimulus package to accelerate economic recovery. And the package needs to be aimed at MSMEs and other vulnerable sectors like transport, retail, etc. Social sector should also get its due. More money in the hands of people will lead to rise in consumption levels which will in turn push up the economy. In this context, the Central government has its task cut out. Unless it succeeds in rebooting the economy faster, the consequences will be multi-fold. And the pain will last longer. It is time the government realises this fast and comes out with adequate measures for the revival of the economy.