While policymakers may not have the conventional fiscal and monetary policy space deployed in 2020, what they have now is the ability to use a ‘vaccine stimulus’ to combat repeated COVID waves.
India’s faster-than-expected rebound is very encouraging. But given labour market pressures and prospects of a K-shaped recovery around the world, the economy will need to be carefully nurtured and stoked.
So even as economies heal from COVID-19, the distribution of incomes across capital and labour risks becoming very skewed in favour of capital. Why does this matter? Equity issues apart, this portends ominously for future demand.
There are no silver bullets or quick fixes. Only a well-thought-out and sequenced reform plan. One that Reclaiming lays out meticulously and comprehensively.
The corona crisis has highlighted the criticality of social infrastructure. India must monetise existing assets in the public sector to fund growth-enhancing investments in physical and social infrastructure.
The global market mayhem reflects an unprecedented intersection of worldwide demand destruction, an adverse supply chain shock from China, and a positive oil shock.
All told, the budget has performed an artful balancing act against a difficult macro backdrop. The big themes — financial, external, fiscal — are all well-intentioned. Now, the authorities must walk the talk with equal skill.
Policymakers have done well in the last few years to ensure macroeconomic stability. They must not now give in to the clamour for fiscal, monetary and regulatory easing.
Current buoyancy in global markets is misleading. Structural flaws have not been corrected, economic nationalism is surging and we could be heading towards an economic malaise
