The crisis caused by COVID-19 had led to effective policy formulation and action by the Centre, State and local bodies, but rising unemployment and inflation would lead to a financial crisis which India could overcome if there was no third wave, said Dr. Pinaki Chakraborty, Director, National Institute of Public Finance and Policy, Delhi.
He was speaking at the K.N. Raj Memorial Lecture on “COVID pandemic and public finance: emerging issues,” organised by the Department of Economics, Central University of Kerala.
Plans to ensure subsistence were short-term measures. The solution to unemployment was a rapid recovery of the economy. If there was no third wave, India could overcome this issue, he said.
He said that in addition to the financial expenditure incurred by the government to overcome the crisis during the pandemic, the need to spend more on the health sector had led to a widening fiscal deficit.
The deficit of the Centre had risen to 9.5% of the GDP and that of State governments to 4.5% of the SGDP. The increase in the deficit had led to an increase in loans.
This crisis also affected the demand and supply, especially with lockdowns disrupting economic activities on a large scale, he said.
Prof. K.C. Baiju, Head, Department of Economics, presided over the function. Dr. Syam Prasad delivered the welcome address and Dr. Anver Sadath proposed a vote of thanks.