{"id":113443,"date":"2021-06-18T13:11:16","date_gmt":"2021-06-18T07:41:16","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=113443"},"modified":"2021-07-01T13:13:50","modified_gmt":"2021-07-01T07:43:50","slug":"recovery-takes-more-than-reforms","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/recovery-takes-more-than-reforms\/","title":{"rendered":"Recovery takes more than reforms"},"content":{"rendered":"<p><b>Source: <\/b><a href=\"https:\/\/epaper.thehindu.com\/Home\/ShareArticle?OrgId=GBF8M7J1Q.1&amp;imageview=0\"><b>click here<\/b><\/a><b>\u00a0<\/b><\/p>\n<p><b>Syllabus: GS 3<\/b><\/p>\n<p><b>Synopsis: <\/b><span style=\"font-weight: 400;\">The focus must be on food supply and not money supply for economic recovery.<\/span><\/p>\n<p><b>Introduction\u00a0<\/b><\/p>\n<p><span style=\"font-weight: 400;\">The recent growth estimations of the National Statistical Office show that after a contraction in the first quarter of last year, growth accelerated gradually afterward. This would have assured a recovery if the second wave of the pandemic didn\u2019t hit the country.\u00a0\u00a0<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Overlapping State-level lockdowns had an impact on the economy. Production must have contracted at the beginning of this year. That\u2019s why recovery could be W-shaped rather than V-shaped.<\/span><\/li>\n<\/ul>\n<p><b>Explain the potential of reform measures in bringing about an economic recovery.<\/b><\/p>\n<p><span style=\"font-weight: 400;\">On the issue of economic recovery, a minister stated that the economy will recover due to the reforms planned or already implemented by the government. However, one doesn\u2019t know how much the reforms can make a difference at this stage.<\/span><\/p>\n<ul>\n<li><b>Firstly, the term \u2018reforms\u2019\u00a0 is used for policy changes that remove limits on private sector activity <\/b><span style=\"font-weight: 400;\">in certain areas and those that increase profits in existing lines of production since 1991. <\/span>\n<ul>\n<li><b>For example<\/b><span style=\"font-weight: 400;\">, allowing greater private sector participation in defence as part of the Atmanirbhar Bharat Abhiyaan launched in 2020 and the major lowering of corporate tax in 2019.<\/span><\/li>\n<\/ul>\n<\/li>\n<li><b>Secondly, more reforms may be futile in driving recovery<\/b><span style=\"font-weight: 400;\">. The private sector\u2019s entry into a new area or investment in an existing activity may not be profitable, as their revenue will depend on the state of the economy in the near future.<\/span><\/li>\n<li><b>Thirdly, i<\/b><span style=\"font-weight: 400;\">n February, after the peak, the government returned to its principal macroeconomic pre-occupation, i.e. fiscal consolidation or the paring down of the fiscal deficit. It raised its cost outlay by less than 1% in the last Budget. However, the <\/span><b>second wave of COVID-19 threw the economic policy calculations.<\/b><\/li>\n<li style=\"list-style-type: none;\">\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Keeping public expenditure unchanged with a possibility of further contraction of the economy. This fiscal stance would be disastrous.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\"><b>Fourthly, data from the Centre for Monitoring Indian Economy displayed that unemployment has risen in May<\/b><span style=\"font-weight: 400;\">, showing less demand for output. The private sector is aware of this and is unlikely to respond with enthusiasm to relaxing reforms.<\/span><\/li>\n<\/ul>\n<p><b>What should be done?<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><b>Increasing public spending is the only option left<\/b><span style=\"font-weight: 400;\"> to the policymaker serious about bringing on a recovery. We need to accept a higher than budgeted deficit.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">A debate including economists and central bankers has been set off on whether the government should now \u2018print money\u2019. This is the wrong way to approach the problem. It is also alarmist. The objective is to revive the economy, <\/span><b>public spending is the tool and the funding must be found.<\/b><span style=\"font-weight: 400;\"> It need not involve money creation.<\/span><\/li>\n<li style=\"font-weight: 400;\"><b>Debt financing<\/b><span style=\"font-weight: 400;\"> remains an option as India\u2019s public debt is low by comparison with the OECD countries. <\/span><b>Even if money financing is adopted, it won\u2019t cause accelerating inflation <\/b><span style=\"font-weight: 400;\">as some expect. Experience in India suggests otherwise.\u00a0<\/span>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">However, studies do show that any economic expansion would be inflationary if the production of food does not respond sufficiently.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\"><b>The focus must be on the food supply and not the money supply<\/b><span style=\"font-weight: 400;\">, in any serious attempt at economic recovery.<\/span><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Source: click here\u00a0 Syllabus: GS 3 Synopsis: The focus must be on food supply and not money supply for economic recovery. Introduction\u00a0 The recent growth estimations of the National Statistical Office show that after a contraction in the first quarter of last year, growth accelerated gradually afterward. This would have assured a recovery if the&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/recovery-takes-more-than-reforms\/\">Continue reading <span class=\"screen-reader-text\">Recovery takes more than reforms<\/span><\/a><\/p>\n","protected":false},"author":10315,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[9],"tags":[],"class_list":["post-113443","post","type-post","status-publish","format-standard","hentry","category-public","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":"","cached_date":1704779929},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/113443","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10315"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=113443"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/113443\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=113443"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=113443"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=113443"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}