Ashu Suyash, MD and CEO of Crisil, the country's leading rating agency, believes that the Corona epidemic has caused a big loss to the GDP. For the time being, the government should focus on two issues the most. First, the speed of vaccination should be increased. Second, special efforts should be made to help the sectors which have been affected the most by the corona epidemic. Excerpts from a conversation with Jai Prakash Ranjan of Dainik Jagran:
Question: How is Crisil assessing the impact of the second wave of Corona on the country's economy?
Answer: We believe that the second wave has had a significant impact on private consumption and investment in India. Both of these are considered very important for economic development. The first wave of Corona caused the biggest decline in the economy since the country's independence. Amid efforts to recover from it, Corona started showing its effect again and the situation changed drastically. The lockdown has shown a great impact on the morale of consumers and businessmen. The second wave is now quite weak but the number of new infections daily cannot be said to be very low. There is also talk of a third wave and the pace of vaccination is also not enough. There is still a lockdown for many sectors. Given all these circumstances, we have reduced the country's economic growth forecast from 11 percent to 9.5 percent for the current financial year. By the way, even in the most gloomy environment, we are expecting the economic growth rate to be at least eight percent this year.
Question: When do you expect the growth rate to return to normal and how is the situation looking for the next three-four years?
Answer: After a sharp decline in the first quarter of the last financial year, India's economic growth rate was able to return to the pre-pandemic condition only in the fourth quarter. However, the first quarter of this year has somewhat dampened the progress we had made. It seems that it will take more than a quarter before the situation reaches the pre-pandemic condition. We have estimated a growth rate of 9.5 percent on the premise that the situation will improve more rapidly after the second quarter. If the medium-term i.e. between 2021 and 2025 is estimated, then due to the epidemic, the size of real GDP is seen decreasing by 10.9 percent. This can be seen as a permanent loss to the economy due to the pandemic. We see the phase of rapid recovery or rapid growth in the economy returning only in the financial year 2022-23. By then the majority of the population would have had the vaccine. The government claims that by the end of this year, 88 percent of adults will have been vaccinated. But we estimate that only 70 percent of adults will be able to get the vaccine.
Question: What kind of fiscal measures would you like to suggest in this situation?
Answer: The sectors which have been affected the most by the pandemic will have to easily arrange loans at low rates. Healthcare, small businesses, and consumers will have to find a solution to the liquidity problem. Along with the monetary policy of the RBI, the financial policy of the government is also very important in the current situation, which can prove to be more effective in providing relief to the general public. In two areas, the government can use its funds better. First, on the rapidity of vaccination, because it is difficult to prevent further outbreaks of the pandemic unless everyone is vaccinated and protected. Second, to spend sufficiently on improving the condition of small entrepreneurs, rural income, service sector, and urban poor, because the condition of these four sectors has worsened due to the lockdown. For the rural economy, there will be a lot of difference by giving focus on MNREGA and PM Awas Yojana and increasing the allocation. Talking about the urban economy, it is necessary to give help to the workers of the unorganized sector there. The service sector is badly affected and despite the opening of the lockdown, there is no significant improvement in its condition. 70 percent of the economy of cities is run by the service sector. There is no job guarantee in this sector. Small companies have got a setback from three sides. There is no demand, there is a supply problem and the cost is also increasing. They need more help from the government.