Economic Recovery

Post Pandemic Economic Recovery

India’s GDP contracted by 23.9% in the first quarter of 2020. Unemployment rates have skyrocketed, with the month of July alone accounting for 5 million salaried job losses. The economy has faced simultaneous shocks both to aggregate supply and the aggregate demand.The Takshashila Institution believes that an immediate disaster relief, a stimulus for economic revival, and a multi-year economic reconstruction programme are needed to lead India in the path of post-pandemic economic recovery. To achieve this, the levers of fiscal policy, monetary policy and deregulation must be used.

Immediate disaster relief

The union and the state governments should provide economic relief to the most vulnerable sections of the population. This should include basic income support and provisions for food. New avenues should be tried out to reduce the transaction costs in income transfers. Monetary and non-monetary incentives should be provided to frontline workers. Liquidity support should be extended to businesses and entrepreneurs.

Economic revival

India should aim to spend INR 80 lakh crore on public health infrastructure, physical infrastructure, technology, human capital, and green energy over the next 5 years. India should aim to attract more foreign investments by reducing regulatory bottlenecks. To strengthen the financial sector and ensure financial sector stability, an Indian version of TARP must be rolled out. Nighttime commerce needs to be facilitated to increase economic activity, create employment, and ensure social distancing.

Economic growth and employment

India should aim to build 100 new cities. This will spur economic activity and create jobs. India must also capture the manufacturing opportunity which has been reopened because of the US-China trade war and the pandemic.