The Need for an Economic Recovery for India during and post-pandemic

With the ongoing pandemic a few things are now becoming obvious on the economic front. 

The much touted economic recovery plan Aatmanirbhar Bharat has been partly successful; however, with judicial interference now and anticipated in the future, one can see the reform roll out promised under the program failing to materialize before end of 2023. The Loan sanction vs disbursal ratio under the emergency credit loan guarantee scheme clearly did not pan out on desired lines for some crucial reasons I had highlighted earlier. Agricultural reforms remain in the cold storage for now. 

Part success of course has been used because PLI schemes of certain sectors have received great response. Particular focus for applause should go on mining, pharmaceuticals and electronics, as well as medical devices which also hold great promise and can be indeed transformative along with textiles. However, in the other sectors it remains an expression of noble intentions like solar PV modules and electric batteries at best for various reasons that need detailed explanation. 

The second wave of COVID has of course thrown a spanner in the works for India. An anticipation of international orders has been rendered hopeless given the situation playing out for India being viewed by the world's buyer as one that will see orders not being fulfilled despite any and every intention being expressed otherwise. Therefore, the much talked about making in India for the world remains a non-starter. The damage done will take at least five years to recover from this time around, given the back-to-back hits and reduced purchasing and order delivery capacities of Indian buyers and sellers has also been significantly affected at the MSME level, as industrial clusters remain moribund.

Another red flag right now is the consumer attitudes on display of late. The intention of the ordinary employee of the middle class (lower to upper spectrum) is to save. Thrift is the norm, given people seeing their peers suffer from the double whammy of healthcare expenses related to COVID and the losses of jobs. In such an uncertain environment, spending money on non-essentials will remain a distant dream. Adding to taxation on a wide spectrum of savings instruments, and the mood has been further dampened for the middle class.

Similar aversion towards investing more money into expansion or greenfield investments from larger industries is on display. This is also made impossible by the large scale harassment and the extensive clearance webs that remain at state and local levels. Ironically, the party ruling at the Centre has been unable to convince its state counterparts from the same party, forget opposition ruling parties, to cut back on or rein in in any significant way. One can cite high FDI numbers, but a closer examination also shows that most of it is in areas that do not generate jobs.

Job generators have also melted down. Startups are in shambles right how; most of them are desperately looking for an exit through a golden handshake of sorts by their investors. The bubble has started to deflate. The meltdown is not a pleasant one - many people are now struggling to get jobs, and not even a gig economy can help tide over the transient crisis they face. The ability of regular job market to absorb them is absolutely not there right now.

Focus on infrastructure is a mainstay of the government; however, it seems to have become an excuse for not delivering on other fronts. While the area has shown great focus, it cannot be a means to an end by itself. Infrastructure is of no use if there will be no movement of goods arising in the first place. That movement is hampered by the lack of demand and the reluctance to invest and expand renders any effort to build infrastructure grossly meaningless. 

To sum broadly, what we have as of now is loss of investor confidence, lukewarm international confidence in Indian abilities combined with the loss of the consumer purchasing power that has to be addressed. While there are no grand solutions, a new roadmap for economic recovery has to be charted. A pivotal economic moment cannot be captured in this ongoing global transition while it remains in a moribund state.

Much was made of the Budget 2021, and yes, there was an ambition expressed for a change. However, crippling delays in implementing a large number of ideas proposed in the Budget have made the announcements just that - mere announcements. Only a part of the idea was so far rolled out. Also, those announcements of Aatmanirbhar Bharat like disinvestment continue to remain in the bag. There can be no right time to do the right thing, and hopefully it will be realized sooner than later.