What do you think the Indian Government needs to do to Jump-start the Indian Economy and put it back on rails post-COVID 19?
Undoubtedly, the prolonged pandemic has disrupted business cycle and drained liquidity out of the economy. Some economies suffer dreadfully and drawn into vicious cycle which lead to recession and even depression.
When the pandemic is over, the economy need a jump start. Liquidity needs to be pumped into the economy. With fresh liquidity companies can purchase materials and pay wage to restart the production. On the other hand, households can buy produced goods and supply labor. The business cycle resumes.
The government is the ultimate source of liquidity in times of crisis. The government may absorb idle liquidity from the domestic market. Alternatively, the government may borrow relief fund from international institution such as the IMF or the World Bank. The government then redistribute the liquidity to productive business as loans as well as to households as financial aid.
After domestic production and consumption recuperate, investment and foreign trade will follow.
This process has been underway since the end of 2020. Despite the fact that the SARS-CoV-2 (Covid-19) pandemic is not yet fully over, some economies have seen a strong recovery from last year's recession since the spring of 2021. In a situation where production and employment are growing in a significant part of sectors, mainly manufacturing sectors and industries, including production for export of highly processed products, the economy is quickly recovering from the economic crisis of 2020. An effective anti-crisis, pro-development, interventionist socio-economic policy, including budgetary, fiscal, sectoral, social and monetary policies, is conducive to the improvement of the economic situation. According to the latest forecasts of economic growth (published in May - June 2021), some economies are expected to experience economic growth above 4 or 5 percent at the end of this year 2021. GDP. It is a relatively quick recovery from the economic recession, which occurred to the greatest extent in the second quarter of 2020, i.e. during the development of the 1st wave of the pandemic. However, each subsequent wave of the pandemic, i.e. the 2nd wave in autumn 2020 and the 3rd wave in spring 2021, had a much smaller impact on financial markets and entire economies. Already from the second wave of the pandemic, many enterprises underwent recovery and development restructuring processes, adapting to the new, pandemic economic situation. Many business entities then increased the scale of their activities via the Internet. Many companies have made investments in modern information technologies supporting company management processes in new, more difficult conditions of the economic environment. Therefore, in some economies, the first symptoms of recovery from the economic downturn and recession appeared already at the end of 2020.
Best regards,
Dariusz Prokopowicz
