Recovery takes more than reforms

In any serious attempt at economic recovery, the focus must be on food supply and not money supply

The most of the National Statistical Office show that after a steep contraction in the first quarter of last year, growth accelerated steadily afterwards. This would have assured a recovery had we not experienced the second wave of the pandemic that came with the current financial year. Overlapping State-level lockdowns that started in April have now lasted for almost as long the nationwide lockdown of 2020, and there is no gainsaying their impact on the economy. Output may well have contracted in the beginning of this year. So, though recovery will eventually come, it could be W-shaped rather than V-shaped. When the issue of economic recovery was raised in public, a minister asserted that the economy will recover due to the reforms planned or already implemented by the government. We do not know what the government has in mind but we should be sceptical of the claim that reforms can make a difference at this stage. Since 1991, the term ‘reforms’ has been used to mean both policy changes that remove restrictions on private sector activity in certain areas and those that increase profits in existing lines of production. Recent examples of these are allowing greater private sector participation in defence as part of the launched in 2020 and the significant lowering of corporate tax in 2019, respectively. However, more reforms may be ineffective in spurring recovery. Presently for the private sector, entry into a new area or undertaking investment in an existing activity may not appear profitable given their expectation of the state of the economy in the near future, upon which their revenue will depend.