How India should ensure sustained economic recovery post-pandemic

The global economic slowdown caused due to the pandemic has been an eye-opener for various economies chasing growth. They have realized the importance of sustainable growth and contingency planning to cushion deep shocks. Although the scale of the spread of the pandemic was not foreseeable, a resilient and robust underlying policy framework has enabled many nations to get on their feet again. Notwithstanding the unique challenges that countries faced, let us attempt a comparative analysis of economic metrics to understand the hits and misses in terms of economic policies and practices and eventually help policymakers to replicate the successful ones. Australia and New Zealand got the basics right early and concentrated efforts on health infrastructure to minimize the impact of supply shock and subsequent demand shock due to lockdowns. Spending on goods and services grew by 7.9 per cent in Australia for Q3 2020. In New Zealand, industrial production decreased by two per cent in Q4 2020 while the unemployment rate was 4.9 per cent. The GDP growth rate has been projected within the range of 4 - 5 per cent for 2021, while the IMF projects a GDP growth of three per cent % for 2021 for Australia.

Industrial production decreased by 1.9 per cent in January, 2021 in Europe. New job postings reduced by around 40 per cent in food and beverages sector, indicating challenges of employment. A report by McKinsey estimated that around 59 million jobs may be at risk. The GDP growth rate of the US economy for 2021 was projected earlier to be around 3.08 per cent. The recovery is slow but steady. The industrial production index decreased by 4.2 per cent in the last year, but the increasing market confidence due to ongoing vaccination drives is raising hopes for normalcy.Joblessness is still a major concern with a February, 2021 McKinsey report saying only 60 per cent of job losses have been recovered.

India has been on the path of recovery since Q4 2020, when the GDP increased by 0.4 per cent and GVA by one per cent.The GST collection and eWay bills generation have reached a high, signifying a boost in domestic spending. The share market also recorded significant growth. Indian Forex reserves have become the fourth largest in the world, surpassing Russia.

Though the economy is projected to contract in 2021,there is a 12.6 per cent projected economic growth by OECD for 2022.The Index of Industrial Production shrank by 12 per cent in the period April,2020-January, 2021. The contraction in January,2021 has been around 1.6 per cent, indicating slow-paced recovery.The unemployment rate increased from 6.53 per cent in January,2021 to 6.9 per cent the next month and the major contribution to unemployment has been from the rural areas.

Thus, India needs to focus on the rural sector and boost employment opportunities and stimulate rural markets to develop a solid base for recovery. An important element in this would be the communication to remove skepticism and fear over vaccines, and chart out a robust vaccine-coverage strategy. Sustenance and empowerment of rural and local economies and strengthening the 'Aatmanirbhar Bharat' initiative will go a long way in helping us recover and reinvigorate.

The author is Director, IIM-Indore. The views expressed are personal.