Post Covid-19: recovering and sustaining India’s growth

Ashima Goyal

Indian Economic Review, 2020, vol. 55, issue 1, No 9, 181 pages

Abstract: Abstract The paper discusses past virtuous growth cycles in India and argues that the post Covid-19 macro-financial package is an opportunity to trigger another such cycle by raising marginal propensities to spend above those to save. This is feasible since the major constraints that aborted such cycles in the past are waning. Among these constraints are commodity price shocks and other supply-side bottlenecks; financial repression and discretionary allocation; and fiscal space. While the first constraint is relieved, and there is adequate progress on the others, fiscal space is still constrained. Even so, the Covid-19 crisis necessitates a large macroeconomic stimulus. In order not to overstrain government finances it should be targeted, temporary and self-limiting. Financing features can aid this as well as improve financial stability. Large government assets can be monetized to help restructure towards more effective government spending. Specific policy implications are drawn out.

Keywords: Covid-19; Virtuous growth cycles; Commodity price shocks; Macro-financial stimulus (search for similar items in EconPapers)
JEL-codes: E32 E44 E52 E62 O11 O16 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1007/s41775-020-00089-z

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