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A few days ago, economist Abhijit Banerjee said that the Indian economy had been one of the worst performing in the world. One of the main factors behind that, according to him, was inadequate fiscal stimulation in the economy which has led to no growth on the demand side or on the purchasing power of the people. Kaushik Bose, the former Chief Economist of India has remarked that from the report of 99 countries’ economic performance of the April-June quarter, it was observed that the Indian economy was one of the three lowest growing economies. Bose said that in FY 2020-21, India would be one of the 10 least growing economies of the world. But six years ago, India was one of the three highest growing economies.

Finance Minister’s observation is optimistic

On the basis of the economic performance of last September, Finance Minister (FM) Nirmala Sitharaman said that there has been a ‘credible sign’ of economic growth that has been inching towards normalcy. But she also reportedly said, “The Finance Minister is not averse to taking any further measures to ameliorate suffering of the people.” In this case, Sitharaman’s opinion was also contradictory to that of Banerjee. She said that during the last six months, the government has implemented various fiscal stimulus and other economic packages to boost economic recovery. It has taken every possible measure to address the concerns of all stakeholders and the citizens and progressively extended help on both demand and supply sides - to bring the economy back on track.

The FM pointed out some estimates and figures to support her view. Business activity has been increasing - implying positive recovery. In the month of September, collection has been `95,480 crore and was up by 4% and according to the Indian FM, that was a sign of revival. She also cited that rail freight revenue increased by 13.5%, power consumption by 4.2% and pointed out rising tractor sales, good monsoons, and other positive indicators like the PMI of the manufacturing sector. Other improvements that she pointed out were improvements in e-way bills, exports, kharif sowing, cargo traffic and passenger vehicle sales. Along with this, the FM also mentioned the list of areas where the government had disbursed or spent money to boost economic growth as a challenge to the crisis faced by India in the Covid 19 situation.

Industrialists’ views

The CEOs of top 115 companies met at Confederation of Indian Industries’ (CII) National Council a few days ago to discuss and went for a poll about the revival of business sentiment and the expected corporate performance. As a whole, the business leaders expected revival and stated that the worst might be behind them. The representatives were from various sectors. The poll outcome shows that on consumer’s demand, 32% were hoping for better prospects while the other 27% expected no changes compared to that of the second half of the last year. The most striking is that only 31% of the CEOs expected that their revenue growth would be in positive territory in the second half compared to the previous year. About 40% hoped for better export and 24% expected no change. The CII stated that frequent lockdowns in different states should be disallowed to help the growth of the economy.

The recent edition of Mint’s macro tracker indicates some recovery from August. But even in September, the macro tracker showed that only six of the 16-high frequency economic indicators considered in the tracker are in the green or above their five-year average trend. The remaining are in red or below their five-year average trend. In last April, only two indicators out of 16 showed green. 

Economists' views

Several economists were against complete lockdown from the beginning and preferred the implementation of a judicious and selective lockdown. India maintained the most severe lockdown in the world. It is thought that is the root cause of steep de-growth in the economy. As a huge number of people lost livelihoods in this Covid 19 phase, the government should have helped them adequately by supplying money and other necessities. But that has not been done. The demand level is very low and the production capacity is unutilised by more than 50% now and was about 70% earlier in most of the sectors. Even in the agricultural sector, production of perishable products fell due to low demand. Employment fell and the government allocated more funds to the MGNREGA scheme. The private new investment is almost nil, working capital of the private sector has almost dried up, public investment is low due to shortages of revenue and household savings have fallen. All these mean that the economy is in depression and in deflation. The economy cannot revive without adequate fiscal stimulus packages and the list of the FM’s fiscal stimulus package is not at all useful for reviving the economy.