The Economic Survey 2020-21, which was presented in Parliament on Friday by Union Finance Minister Nirmala Sitharaman has not only brought to the fore the harsh realities that the country has faced in the wake of the global Covid-19 pandemic, but has also raised hopes for a slow but steady recovery of the situation. Dedicated to the Covid Warriors, Sitharaman's Economic Survey has very rightfully put on record that India focused on saving lives and livelihoods by its willingness to take short-term pain for long-term gain, at the very onset of the pandemic. She has also pointed out that India's response strategy stemmed from the humane principle that human lives lost cannot be brought back and that GDP growth will recover from the temporary shock caused by the pandemic. It is a fact that India's decision to go for an early and intense lockdown did provide a win-win strategy to save lives, and preserve livelihoods via economic recovery in the medium to long-term.
As Sitharaman has stated, the Government of India's strategy was also motivated by the Nobel-Prize winning research by Hansen & Sargent (2001) of a policy focused on minimizing losses in a worst-case scenario when uncertainty is very high. Today the world community has highly appreciated India's strategy which led to speedy flattening of the curve, pushed the peak to September, 2020. After the September peak, India has been unique in experiencing declining daily cases despite increasing mobility. While the pandemic severely affected both demand and supply, India also stood out as the only country to announce structural reforms to expand supply in the medium-long term and avoid long-term damage to productive capacities. As the Union Finance Minister has claimed, calibrated demand side policies have ensured that the accelerator is slowly pushed down only when the brakes on economic activities are being removed. A public investment programme centered round the National Infrastructure Pipeline to accelerate the demand push and further the recovery has further strengthened India's recovery campaign. While the pandemic ensued a severe global economic downturn – the severest one since the Global Financial Crisis - the lockdowns and social distancing norms additionally impacted upon the already slowing global economy an brought it down to a virtual standstill.
It is significant to not that India adopted a four-pillar strategy of containment,
fiscal, financial, and long-term structural reforms; simultaneously, calibrated
fiscal and monetary support was provided, cushioning the vulnerable during the
lockdown and boosting consumption and investment while unlocking, and a
favourable monetary policy ensured abundant liquidity and immediate relief to
debtors while unclogging monetary policy transmission. Sitharaman has also
expressed confidence over the fact that as per the advance estimates by NSO,
India's GDP is estimated to grow by (-) 7.7% in FY21 – a robust sequential
growth of 23.9% in H2: FY21 over H1: FY21. Additionally, India's real GDP is
expected to record a 11.0% growth in FY2021-22 and nominal GDP to grow by 15.4%
– the highest since independence. There is no denying the fact that India
became the fastest country to roll-out 10 lakh vaccines in six days and also
emerged as a leading supplier of the vaccine to neighbouring countries and
Brazil. Furthermore, the economy's homecoming to normalcy was brought closer by
the initiation of a mega vaccination drive. This in turn has triggered off
hopes of a robust recovery in services sector, consumption, and investment
which have been already rekindled. The Government has also adopted a stance in
which reforms must go on to enable India realize its potential growth and erase
the adverse impact of the pandemic. While the Economic Survey has given a lot
of indications about how Nirmala Sitharaman's ensuing budget will look like,
India's mature policy response to the 'once-in-a-century' crisis has definitely
provided important lessons for democracies to avoid myopic policy-making and
demonstrates benefits of focusing on long-term gains.