Simple economic packages for COVID times can boost consumer confidence
A few months back many of us were enthusiastictravelers and willing to purchase new goods or redo our houses,buoyedby the "near defeat "of Covid -19 first wave. That changed within a fortnight in March and the word now hanging over India is uncertainty. This helps us make sense of the latest GDP data, with caveats from the government, of the numbers being revised (downwards) based on future data. The same set of consumers who may have stabilized and pushed the economic growth during the last quarter of 2020-21 have been perhaps the worst-hit during the second wave. This translates into huge lack of sentiment amongst consumers battered by loss of lives and jobs and diffident of spendingbig. Yes, many top business leaders and experts have talked about limited impact of second wave on economic growth, but right now that seems unlikely. The logic is unlike last year when the entire nation was put under a hard lockdown,the policy makers this time have preferred local lockdowns (many of which may well continue in some form till end of year), which could have cushioned impact on economy.
The real issue many might choose to overlook would be a sense of uncertainty wading through most considerations of any economic decision maker, from a small-time shopkeeper, to housewife, to senior bureaucrats in the government. Noone is sure if there will be future waves and what impact will they have on people and business. As the Prime Minister acknowledged and now many US experts have alerted, the virus is a 'shape shifter' and constantly challenges the known frontiers of medical science. This leaves a huge haze for any decision-maker to think long-term. If a large private sector entrepreneur cannot decide the next few quarters' financials including hiring (creating new jobs) and starting new projects, it becomes almost stiflingfor the SME and MSME sector.
The current wave of the pandemic has so far seemed to have impacted urban geographies far more than the rural sector. Urban sector is a constant that keeps the economic engine chugging. It is time to think of corrective actions to ensure a balanced "Covid-adjusted "economic growth for the current fiscal. The finance minister has talked about government not being averse to additional measures to boost the economy (out of budget expenses) if the criticality of the situation demands. What one needs to remember is like cricket, it is the opening few overs which are of critical importance to decide the fate of the game. If the team loses wickets or gives away too many runs, the stress on victory becomes more challenging.
What can be done in the short-term is start talking about various budgetary schemes available for potential beneficiaries, especially those the pandemic impacted. It is time to collate all information together for citizens to start availing the benefits. Secondly, the government's approach has been to dole out aid and relief via public sector banks under various compensations, tax reliefs,complicated loans, manyof which are beyond the comprehension of a beneficiary. The schemes have to be made simpler and explained in a language citizens understand. Thirdly, cash in hand for those impacted by the pandemic will be a great relief and can save the economy from a crash.
(The writer ia a policy analyst. The viwes expressed are personal.)