A+| A| A-

Time for a Massive Fiscal Stimulus

Only bold interventions by the government can ensure a quick recovery of the economy.

The unprecedented 23.9% decline in the gross domestic product (GDP) in the first quarter of 2020–21, mainly due to the stringent lockdown enforced after the COVID-19 outbreak, is not only larger than expected but is also, most probably, an underestimate. This is because the quarterly GDP growth numbers do not capture the trends in the informal sector, which accounts for around half the GDP, and which has remained turbulent in recent years. Yet this sharp fall in growth has made India one of the worst affected COVID-19-hit economies.

Gross value added numbers show that, except for agriculture, which grew by a respectable 3.4%, all the other seven major segments of the economy have registered a contraction. The largest decline was in manufacturing, construction, and trade, hotels, transport, and communication where output fell by 39.3%, 50.3% and 47%, respectively. These three segments ­account for almost three-fourths of the total workers employed outside of agriculture and the sharp fall in output would have wiped out millions of jobs.

To read the full text Login

Get instant access

New 3 Month Subscription
to Digital Archives at

₹826for India

$50for overseas users

Updated On : 7th Sep, 2020


(-) Hide

EPW looks forward to your comments. Please note that comments are moderated as per our comments policy. They may take some time to appear. A comment, if suitable, may be selected for publication in the Letters pages of EPW.

Economic planning requires well preparedness to meet the challenge of a better growth rate.

Ownership of banks by industrial houses will cost the economy dearly.

Using ordinance to protect freedom of expression from foul speech may result in damaging decent communication.

Only an empowered regulator can help boost production and cut coal imports.

Biden’s policy of the “return to the normal” would be inadequate to decisively defeat Trumpism.

*/ */

Only a generous award by the Fifteenth Finance Commission can restore fiscal balance.

*/ */

The assessment of the new military alliance should be informed by its implications for Indian armed forces.

The fiscal stimulus is too little to have any major impact on the economy.

The new alliance is reconfigured around the prospect of democratic politics, but its realisation may face challenges.

A damning critique does not allow India to remain self-complacent on the economic and health fronts.


Back to Top