As a fall-out of the Covid-19 pandemic, India, like most of the economies of the world, is estimated to have experienced severe contraction in its GDP growth during 2020-21. In this backdrop, my own expectation is for “a focused growth-oriented budget” on February 1, 2021 said Prof. Partha Ray, professor of Economics, IIM Calcutta while sharing his expectations on the upcoming Union Budget.
Talking about consumption pattern amid the pandemic, he further said,” Consumption, the traditional driver of Indian growth, has suffered immensely. There was a lull in investment as well. An effective and severe lockdown since end of March 2020, has brought the inherent contradiction between life and livelihood during the time of pandemic to the fore.”
“Naturally, production and value-added have suffered. While firm data may not yet be available, various surveys have revealed substantial loss of jobs as well. Perhaps, with the sole exception of agriculture, most of the sectors seemed to have experienced shrinkage of activities and there are fears whether there could be dent on the long-term potential of the economy. In such a situation, the exuberance in the equity markets seems to be a direct outcome of the massive flow of liquidity from the taps of central banks all around the world. Nevertheless, with the vaccines around and calibrated lifting of lockdown, there are some signs of a turnaround in the economy in recent period.”
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Sharing his views on the upcoming Budget, he stated, “In this backdrop, my own expectation is for “a focused growth-oriented budget” on February 1, 2021. There are two reasons for such an expectation. First, Indian fiscal stimulus has rather been conservative by global standards. Second, monetary stimulus and credit guarantees have limitations in terms of directness and time required for their effective transmission to the common man – all the more when there are red flags on the NPA front of the banking sector. Thus, it is time for a direct fiscal action, shading away fiscal conservatism. Specifically, without falling into any trap of populism, the migrant labour, agriculture, and small and medium industries need to be focused.”