However, formal approaches to predicting the Indian economy’s growth path may not always account for the innate resilience, innovativeness and adaptability of the country’s citizenry, especially in the informal sector. While the first quarter of FY21 exhibited a growth decline of 23.9 percent, the calibrated easing of the total lockdown effected in March 2020 resulted in the economy’s contraction reducing to 6 percent in the third quarter of the year. Indeed, India has the ability to surprise, by exceeding carefully constructed growth projections.
Now that the vaccine rollout has commenced, we need to plan for the economic pathway ahead, not just in terms of a revival to a steeper growth trajectory, but also by imbibing the learnings that the pandemic has brought home to us. Hopefully, one of the durable legacies of this pandemic is the universal realisation that individuals, institutions and firms – all need to ground their planning on a bedrock of sustainability, with adequate care given to considerations of being better aligned with the physical and social environment.
Apart from the global disruptions caused by the pandemic, geopolitical tensions and realignments are leading to disruption in the global supply chains, while economic nationalism has seen a recent resurgence; and this troika of global trends need to be factored in by us while we are calibrating our strategy for economic growth, as well as for becoming a key node in the topography of global investment and trade.
The recently announced national budget has rightly focused on some of the key elements that would be foundational for charting India’s growth and recovery pathways. In many ways, one of the basic themes of the budget is the emphasis on health; not just on curative healthcare and improvement of healthcare outcomes, but also on preventive healthcare for individuals and communities, including the deployment of digital surveillance and digital protection. A refreshing initiative has been the new budgetary schemes addressing the causative factors impinging on health outcomes, particularly air pollution in our cities and water and sanitation across urban India.
In the post-pandemic context, the budget has also substantially enlarged the spending envelope in sectors like infrastructure creation for pump-priming economic growth, as well as for absorbing more of the nearly 12 million young people who are released into the national employability cohort annually. The long-awaited announcement of the legally empowered Development Financial Institution (DFI) with a corpus of INR20,000 crores, which aims to catalyse infrastructure spending of at least INR5 trillion over the next three years, will hopefully lead to flooding back of the now diminished private investment flows into infrastructure, and revive the animal spirits of the economy. The government has also recently announced a slew of initiatives for creating robust rural infrastructure from farmgate to agricultural markets, for improving value realisation for farmers and greater customer choice.
Along with these key levers that the government is focusing on for priming the economy, there are also plans underway for reducing process friction for investors in terms of reducing compliance and regulatory burdens that hamper efficiency and innovation. If we are to benefit from our innate strengths in terms of workforce capabilities, cost advantages and the strength of our domestic market, we need to induce greater efficiencies into other areas like ease of doing business and access to markets.
All told, the economy looks well set on its pathway to recovery and revival, and the roadmap that the government is charting, particularly in terms of the well-received recent budget have made the right moves towards this end. Hopefully, there will also be fresh announcements and programmes for providing succour to those at the bottom half of the pyramid, who have had to take a disproportionate share of the burden from the ravages of the pandemic, in the interest of ensuring fairness in economic growth as well as for constructing a more compassionate and caring society.
The author is Partner and Head, Infrastructure, Government and Healthcare, KPMG in India. Views are personal.
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