? Why Governments Hesitate To Spend?
As India struggles with the Covid-19 crisis and its economic policy response, it is important to remember that unlike in many other countries, the Indian economy was performing very poorly immediately prior to the crisis. The country was undergoing a serious downturn in demand, very high levels of unemployment and a crisis in sentiment. Many questioned the viability of the growth model that had driven Indian growth for the decade prior.
These issues and problems are now multiplied manifold. India now faces both a demand shock and, potentially, a savage simultaneous supply shock in essential commodities which makes macroeconomic management an even more difficult task. The sudden stop in economic activity means that there are critical demand and income shortfalls. These will multiply in the months to come, further contracting the economy.
Dealing with Covid-19 requires three different elements which are being taken into account in many countries to different degrees: first, the protecting and ringfencing of essential services and processes; second, protecting people from the fallout of the lockdown; and third, expanding our financial and infrastructural capacities to deal with the ramifications of the crisis in the weeks and months to come.
In the Indian context, the first and second elements are fairly clear. We need to protect people's incomes at scale to the extent possible. The use of large-scale monetary transfers support workers to through the time of lockdown are essential and all governments have been attempting to arrange that. The unfortunate chaos arising from the very quick initial lockdown and the subsequent internal migration makes this a humanitarian crisis that continues to unfold. At the same time, because commodity supplies are likely to be constrained, along with fiscal transfers, inflationary concerns are real. Ensuring that food supplies continue uninterrupted, using the FCI's buffer stock, is a key macroeconomic policy measure to complement any other demand side measures.
https://www.ndtv.com/opinion/with-long-lockdown-how-government-should-spend-to-save-economy-2211649
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? Why Governments Hesitate To Spend? As India struggles with the Covid-19 crisis and its economic policy response, it is important to remember that unlike in many other countries, the Indian economy was performing very poorly immediately prior to the crisis. The country was undergoing a serious downturn in demand, very high levels of unemployment and a crisis in sentiment. Many questioned the viability of the growth model that had driven Indian growth for the decade prior. These issues and problems are now multiplied manifold. India now faces both a demand shock and, potentially, a savage simultaneous supply shock in essential commodities which makes macroeconomic management an even more difficult task. The sudden stop in economic activity means that there are critical demand and income shortfalls. These will multiply in the months to come, further contracting the economy. Dealing with Covid-19 requires three different elements which are being taken into account in many countries to different degrees: first, the protecting and ringfencing of essential services and processes; second, protecting people from the fallout of the lockdown; and third, expanding our financial and infrastructural capacities to deal with the ramifications of the crisis in the weeks and months to come. In the Indian context, the first and second elements are fairly clear. We need to protect people's incomes at scale to the extent possible. The use of large-scale monetary transfers support workers to through the time of lockdown are essential and all governments have been attempting to arrange that. The unfortunate chaos arising from the very quick initial lockdown and the subsequent internal migration makes this a humanitarian crisis that continues to unfold. At the same time, because commodity supplies are likely to be constrained, along with fiscal transfers, inflationary concerns are real. Ensuring that food supplies continue uninterrupted, using the FCI's buffer stock, is a key macroeconomic policy measure to complement any other demand side measures. https://www.ndtv.com/opinion/with-long-lockdown-how-government-should-spend-to-save-economy-2211649
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