Nobel laureate Abhijit Banerjee has said that India was already one of the world’s worst-performing economies before the pandemic containment measures were imposed and that the government should have done more to address the impact.
At a virtual event, the Massachusetts Institute of Technology professor said India’s economic stimulus measures were inadequate. “India’s economic stimulus was limited. It was a bank bailout. I think we could have done more,” he said.
The measures “did not increase consumption spending of lower income people as the government was not willing to put money in the hands of the low-income population,” he noted.
However, he said that in the July-September quarter the country will see growth recover, adding that economic growth in 2021 is going to be better than this year. He noted that India needs to be more competitive globally.
In the April-May quarter, India’s gross domestic product contracted by a record 24%, according to the government. The country remained shut in April and May due to the lockdown to contain the spread of the coronavirus.
Most observers believe that because of the widespread lockdowns, the data quality is sub-optimal and they expect the numbers to worsen when they are eventually revised.
The 24% contraction jolted analysts, and rating agencies revised downwards their outlook for India’s gross domestic product. Fitch revised it to 10.5% from 5%, while Goldman Sachs has now pegged it at 14.8% from 11.8%.
Though the government has eased the lockdown norms, demand remains subdued in most sectors as people are still cautious about spending due to widespread job losses and businesses failing.
India’s rapidly growing Covid-19 caseload also remains a concern. It has now crossed six million and is second only to the US in the world. Over 80,000 people are testing positive for the virus on a daily basis.
Meanwhile, the output of eight core infrastructure sectors contracted for the sixth consecutive month in August, mainly due to a decline in the production of steel, refinery products and cement.
Barring coal and fertilizer, all sectors – crude oil, natural gas, refinery products, steel, cement and electricity – recorded negative growth in August.
During April-August this year, the sectors’ output dipped by 17.8%, compared with a growth of 2.5% in the same period of the previous year.