April 29, 2021 3:11:23 am
MOST HIGH frequency indicators were peaking in India before the pandemic hit the country in March last, said Chief Economic Adviser, Krishnamurthy V Subramanian. According to him, if the pandemic had, counter-factually, hit in April, India’s growth would have reached 6 per cent.
“The decline has been because of the overhang of the financial sector and the policies that were brought in after July when the pandemic struck … However, India is the only country to have changed its narrative and brought in seminal changes to the way we think about the economy,” he said during a recent panel discussion organised by The Indian Express and Financial Times (FT).
The topic of the panel discussion was ‘India’s Economy: How it can regain sustained growth’ and it was part of a day-long online series to discuss India’s place in the post-pandemic world.
Other panelists in the session moderated by Amy Kazmin, South Asia Bureau Chief, FT, were: P Anbalagan, CEO, Maharashtra Industrial Development Corporation; Jahangir Aziz, Chief Economist, Emerging Markets, JP Morgan; Rohini Malkani, Senior Vice President, Global Sovereign Ratings, DBRS Morningstar.
The panelists discussed the role of the state and investment climate for businesses, what an ‘Aatmanirbhar Bharat’ meant, what factors contributed to the slowdown, the fault lines in the Indian economy, and the impact of the second wave of Covid-19 on growth. While Anbalagan elaborated how Maharashtra handled the first wave by enhancing permission through portals and giving the industry time to recover,
Malkani acknowledged the proactive measures announced by the Central government to boost growth, though it would ultimately depend on implementation and execution, she said.
Aziz pointed to India’s dependence on globalisation and how with the decline in global trade, the effects showed in the nation’s GDP. He said, “What happened to India is a structural change … If you go back to 2000, where India is an emerging market economy that latched on to the globalisation bandwagon, it is largely exports … But by 2012, Indian exports slowed down and corporate investment slowed down … and India lost that driver of growth. It hasn’t recovered over the last 10 years through reforms or policy changes to find a new driver of growth, which is basically domestic demand … Together with demonetisation, GST and liquidity shocks, the situation has worsened.”
Malkani spoke of other drivers such as “consumption and investments slowing down, weak rural demand, disruptions in the urban sector – inability to get loans – and financial stress impacted by monetary policy transmission despite the RBI cutting rates and injecting liquidity.” “We need to take all these factors in consideration as well,” she said.
Subramanian seemed optimistic about coming away with fewer “scars” from the impact of the second wave, as he spoke of the learning from the first cycle of the pandemic. “Then, we were a situation of ‘unknown unknown’, now it is a situation of ‘known unknown’. Once the second wave is done, we would want to be in a state of ‘known known’ … while I think the pandemic shouldn’t extend beyond May, and that the impact may not be very large, we have to say this with an enormous dose of humility.”
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