India’s carefully crafted response minimized pandemic’s effect on the Indian economy. The country is likely to have a current account surplus this fiscal because of import moderation.
Current Account Surplus
Chief Economic Advisor K V Subramanian stated that India is likely to have a current account surplus owing to import moderation. Noting India’s response to the pandemic, he said that it identified the different nature of the crisis correctly and dealt accordingly. While addressing a virtual conference organized by industry body CII, he said that we had current account surplus worth USD 20 billion in Q1. Mentioning this, he added that even if we do not see a good performance, the existing account will still have a surplus. Further, he said that though the lockdown affected the economy in the short term. However, he opines that the Indian economy is unlikely to suffer in the medium to a long time.
Covid Crisis- Under Heating of the Economy
Describing the nature of the Covid crisis, he stated that the situation hurt demand. Unlike a typical economic turmoil in emerging economies, the Covid crisis’s personality is that of an under heated economy. Hence, the reforms undertaken were necessary so that the effect of the crisis on long term growth could be avoided.
Government’s Efforts for Sustained Growth
He said that the Insolvency and Bankruptcy Code was a significant step towards the formalization of the economy. Further, the definitional changes of MSMEs and long-pending agricultural reforms will change the macro configuration of the economy towards employment-intensive sectors. Additionally, performance-linked incentive schemes, along with labour reforms, will add to the robust job creation in the economy. This will make growth more sustained. Noting the idea of Aatmanirbhar Bharat, he said that self-reliance is impossible without adequate capabilities. However, abilities are always built by competing with the best.
In all, Subramanian stated that steps taken by the Indian government helped to minimize the effect of the pandemic.