With India’s GDP data for FY20 out last week, it’s time to talk turkey. As against terrifying predictions of growth crashing to 1 per cent in Q4, official data printed at 3.1 per cent. For the full fiscal, it stood at 4.2 per cent, notches below the government’s estimate of 5 per cent.
Recovery should have been underway but for COVID-19, because of which nations are discovering how the economy and human lives could be lost to an unconquerable pathogen. They are also being taught an expensive lesson on the perils of globalisation and over-connectedness to trade.
Several countries including India could choke for breath and analysts have sketched the nightmare for us. First up is a witches’ brew of rising poverty and unemployment. As per the International Labour Organization, nearly 1.6 billion informal workers worldwide are tipped for the chop. Consequently, about 420 million will likely slip into poverty—a first in decades—outrunning various government interventions that helped narrow the inequality divide.
As for India, critics believe the Rs 21-lakh crore economic package is for the birds as the fiscal stimulus comprised just 1 per cent of the GDP. Optimists reason that the government was holding its fiscal ammunition in reserve, allowing itself flexibility to bring the big guns later when the need deepens. But granular data on tax revenue and fiscal deficit released last week introduced us to the grim reality. Net tax collections fell to a decade-low leaving little headroom for manoeuvre.
Fiscal deficit too breached levels last seen during the UPA-era, wiping out Arun Jaitley’s strenuous financial plumbing not by the slip of a pen, but by forced spending. The least the government must do is undertake an urgent, one-time exercise of overhauling the FY21 Budget, reallocating additional spends for health, defence and infrastructure.
It should also provide fresh revenue collections in light of last year’s shortfall, reset fiscal deficit targets by tweaking FRBM guidelines, and importantly, give realistic estimates for growth, which in all likelihood may contract for the first time in 40 years.