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HOW CAN INDIA COPE WITH THE ECONOMY AFTER COVID-19?

Updated: Jun 27, 2020

The Indian economy was in a dreadful phase even before the COVID-19 outbreak, with GDP falling to 11 year low of 4.2 percent in 2019-2020.


Economists have warned that Indian economy will face its worst recession in 40 years.


Now as the government has eased restrictions on lockdown which will give an opportunity to make economy turn around. At the moment the focus of government is to make economy rebound as we continue to co-exist with COVID-19.


National income of a country is determined by private and government expenditure ,investments and net export.With countries sealing their foreign trade in almost all goods and services there is little ambition for export-driven growth now. Global trade is going to take some time post-pandemic recovery.


Therefore economic policy makers must focus on the domestic front and tackle the country's labour potential to make significant progress in country's economic development .


Indistinguishable to the great depression of the 1930s, the problem today is also that of effectual demand. In such a situation stimulus package must focus on reviving demand in the country. Although the government has announced an additional package to revive the economy aiming at infusing liquidity into the economy, its efficiency will depend upon stimulation of demand. At this time it is necessary to boost the income or income earning opportunities of the people belonging to lower segment of society who exhibit higher propensities to consume. However as there are no such policies, income inequality in India has seen a rising trend. Growing inequality aggravates the problem of effective demand by leaving lesser income in hands of those who are in need.


At the moment the focus of the government should be to identify right policy mix of both fiscal and monetary measures that will directly boost employment and effective demand in economy. This can be achieved through employment generation ease by redistributive taxation resulting in income redistribution and higher consumption demand.


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