The unveiling of Atmanirbhar Bharat 3.0 stimulus package worth Rs 2.65 lakh crore, a couple of days before Diwali, has coincided with the release of the RBI’s sobering report that mentions an unprecedented occurrence — India entered a ‘technical recession’ in the first half of 2020-21. The term refers to a period of declining economic performance that lasts for at least two successive quarters. Indian economy, which suffered the worst-ever contraction of 23.9 per cent in the lockdown-hit April-June quarter, witnessed its GDP shrink by 8.6 per cent during the July-September period, as per the central bank’s nowcast. The International Monetary Fund has forecast that the overall contraction in India’s economy will be around 10 per cent for the ongoing financial year.
These are bleak figures, but the silver lining is that the worst seems to be over. India’s hopes of a turnaround rest on the current quarter, which is seeing near-normal economic activity as the festive season is in progress, even as a fresh surge in Covid-19 cases is threatening to disrupt the momentum. Though it is wishful thinking to expect positive growth in this three-month period, the government needs to go all out to come close to the target with more proactive steps.
From real estate to manufacturing, virtually no sector has been left unaddressed in terms of incentives and concessions, but much depends on boosting the confidence of consumers and investors. Spurring consumption has to go hand in hand with better handling of the pandemic. During the lockdown, the prevailing uncertainty forced people to save rather than spend. As per estimates, household financial savings rose to 21.4 per cent of the GDP in April-June, mostly bank deposits, up from 7.9% in the corresponding period a year ago. The pent-up demand is getting released now, but whether spending will remain high even after the festive season is over is a moot point. Consolidation of the gains from the cumulative stimulus package, amounting to almost Rs 30 lakh crore or 15 per cent of the GDP, will determine how quickly and strongly Indian economy makes recovery.