Post Covid-19: Recovering and sustaining India's growth

Ashima Goyal

Indira Gandhi Institute of Development Research, Mumbai Working Papers from Indira Gandhi Institute of Development Research, Mumbai, India

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. It 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, mono-culture and discretionary allocation; and fiscal space. While the first 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. Specific implications for policy 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)
Pages: 25 pages
Date: 2020-04
New Economics Papers: this item is included in nep-gen and nep-mac
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Journal Article: Post Covid-19: recovering and sustaining India’s growth (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:ind:igiwpp:2020-016

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