Indian Economy | Can India combat the long covid of economy and achieve a sustained growth dgtl

There were predictions from the public and private sectors that the economic growth in the April-June quarter of this year would be short-lived. Private forecasters are now looking to slightly lower their expectations for full-year growth. According to them, the growth rate will be below 7 percent. But public sector forecasters seem reticent to predict exactly where growth will stand in the coming quarters. Their predictions are somewhat moderate, in line with the Reserve Bank’s. They are talking about 4 to 5 percent growth. And in the next financial year (2023-24) that rate may go up to 6 percent.

Such dismal figures are reminiscent of the slow growth year of the pre-pandemic phase of 2019-20, when growth stagnated at 3.7 percent. The two years of the intervening Covid-19 episode saw virtually no growth in 2020-22. If these five years 2019-24 are taken together, the average growth rate would be 3.6 percent. From 1970 onwards, it can be seen that these five years were the slowest growth period.

However, it is undeniable that even in such a situation, some light of hope can be seen. Even if a cricket team does not play well overall, just as one or two batsmen or bowlers catch the eye, some glimmers are seen in some areas of the economy. Among these, improvement in transport infrastructure can be said to be foremost. It can be said that ‘digitalization’ has acquired a multi-faceted character. The sector in which manufacturing is certainly promising. It is also true that India has managed to show a much brighter picture than other large economies in a difficult period. However, the overall goal of faster economic growth (typically 7 percent a year) is not evident from these discussions. A tentative explanation for this could be that, just as ‘long-term covid’ has become a recognized phenomenon in medicine, judging by the complex side-effects of the virus, a ‘long-covid’ has become noticeable in economics.

For example, America and Europe (including Britain) are currently having to pay exorbitant prices to rid themselves of the economic impact of the pandemic. Added to that is the response to the sanctions announced against Russia. The economies of both continents, saddled with massive public debt and inflation, could face recession as their central banks borrow at huge interest rates to combat hyperinflation, which will rise over the next two years and not shrink. Meanwhile, China’s economic growth was just 0.4 percent in the April-June quarter. It will not be easy for him to return to the rapid growth of the past.

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These three largest economies account for two-thirds of the world’s gross domestic product (GDP). So while the market-building process continues, growth in the global economy as a whole can be expected to moderate somewhat. The financial growth rate between the two crises (the post-global economic crisis and pre-Covid period) was 3 percent. In comparison, recent projections for 2022 and 2023 indicate a clear decline. While India is faring better than other economies, it is not right to think that the country is on another planet. India is bound to fall into all these crises.

The internal challenges of the country are equally real. India’s public debt has grown rapidly and runaway inflation has emerged. Policy makers are paying more attention to the rise in retail prices, but they cannot rule out the increase in wholesale prices, which have risen to more than 15 percent. As a result, interest rates have inevitably increased and will continue to increase in the future. The consequences of the increase in public debt are more real. By 2010-11, interest on central government debt stood at 29.7 per cent of revenue collected. By 2014-15, this ratio had gone down to 36.5 percent. This ratio remained the same from that time until the onset of the epidemic. Due to the cost of dealing with the crisis caused by the epidemic, the public debt has reached a point where it will take 42.7 percent of the revenue collected to repay it.

As huge deficits in the exchequer became evident, the high interest rates loomed larger than the forecasts of all these calculations and a reduction became imperative. In short, when fiscal policy is based on growth, the economy has little scope for ‘booster shots’ to boost it. Growth control has become essential in large economies. India may not meet the 7 percent target this year. But looking at the overall global and domestic situation, it can be estimated that if India reaches the annual growth rate of 6 percent, it will be a promising achievement.

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The article is in Bengali

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