Anupama Nair
www.mediaeyenews.com
The challenges before the government are multi-fold, and so are the opportunities. A successful resolution of these could trigger a virtuous cycle of growth, and catapult the economy to the higher orbit. The latest available data indicates that the Indian economy may be standing at a variation point. “It may have survived a major mishap in the form of COVID-19, scraping through with couple of broken bones and some bruises. The economy has recuperated well, and is ready for its next phase of growth. The bill to be paid would mostly be known in the next six months. For the next few quarters, the economy may still need to use the crutches of government spending, before it could walk on its own”.
The challenges before the Modi government are, however, multi-fold, and so are the opportunities. A successful resolution of challenges could trigger a virtuous cycle of growth, and catapult the economy to the higher orbit. A failure could bring a disaster of profound proportion.
It is believed that merely achieving a full ‘V’ recovery to the pre-pandemic level of economic activity will be inadequate, because prior to the pandemic the economy was slowing for many years, and was unable to generate adequate jobs for the burgeoning youth population. The government will need to apply multiple accelerators for sustainable growth to reach to the target of 8+%.
COVID-19 has further broadened the income and wealth dissimilarities in our society. Disparities in access to digital infrastructure only increased the divide in social sectors such as healthcare and education. The gap between organized and unorganized sectors has also enlarged.
To maintain societal harmony and peace, the gulfs need to be managed well. Of course, there is no credible precedent to show that these gulfs could be narrowed materially. Nonetheless, by building strong bridges between the two sides will allow the underprivileged to freely cross over to the other side, a positive momentum could be created.
The central banks across the world adopted ultra-loose monetary policies to mitigate the damage caused by the pandemic. These need to be reversed at some point in time. There are sign that abundance of cheap money floating around combined with persistent logistic constraints, and pent-up demand is leading the prices to move beyond the tolerance limits of various economies. Most central bankers have promised the reversal of monetary stimulus to be in order, but short- term disruptions however, cannot be avoided. The Indian government, under Modi needs to create enough cushion for justifying the adverse impact of these likely disruptions. These disruptions might impact inflation, the Rupee value and bond yield due to abrupt outflows.
It is seen that while the world continues to recuperate from the pandemic, the geo-political standoff in Asia is worsening each day, with Afghanistan becoming a symbolic battlefield between the United States and China supported by Russia. The worries for India at the northern and north-eastern borders have risen substantially, mainly with Pakistan-supported Taliban taking control of Afghanistan.
It can be predicted that the coming year would also be traumatic for the world economies as Corona is in no hurry to go anywhere, as wave after wave continues to ravage the world and killing millions in its wake. I hope the economy revives and our lives change for the better.
ians
