Question.
Discuss the impact of the Lockdown on the Indian economy and review the budgetary strategy for combating the recessionary trends in the economy during this period.
( UPPSC, UP PCS Mains General Studies-III/GS-3 2021)
Answer.
The spread of Covid-19 epidemics put a lockdown worldwide including in India and had a bad effect on the country's economy. Here the lockdown has some effects on the Indian economy-
GDP Contraction; Manufacturing sectors, construction, and services sectors were badly affected by disruptions in supply chains, reduced consumer demand, and closure of business, this led to a shard contraction of Indian GDP. As per estimate, Indian GDP contracted 6.6 % in the fiscal year 2020-21.
Unemployment and job loss; The lockdown led to widespread job losses and income reduction, especially in the informal sector. Migratory labor from Maharashtra, Tamil Nadu, and Gujarat returned to their respective states( Bihar and Uttar Pradesh ).
Disruption in supply chains; During the lockdown, raw material imports or interstate movement has badly hampered the manufacturing and distribution of goods.
The decline in consumption and investment; During the lockdown, consumers face uncertainty in income, resulting in spending reduced. That led to a reduction in overall demand and consumption.
Indian government provides the budgetary strategy to support the combating the recessionary trends in the economy during the lockdown period, the following are some budgetary strategies-
Increase in Public expenditure - The government has initiated many schemes like PM Gati Shakti National Master Plan and other investments in roads, railways, airports, and affordable housing concept, with leads to boosting demand and it supported the overall growth of the economy.
Enhanced healthcare spending - The government had increased the budgetary allocation to increase expenditure for healthcare facilities, research and development, and vaccine distribution. It supported human capital development, and it also strengthened the growth of the economy.
AtmaNirbhar Bharat Abhiyan; The government launched the AtmaNirbhar Bharat Abhiyan (Self-reliant India Mission) in 2020 to boost the economy and make India more self-reliant. This includes support for MSMEs( Micro, Small, and Medium enterprises), reforms in agriculture, infrastructure development, and promotion of domestic manufacturing.
Financial Sector reforms- The government has taken many steps to promote digital promotion like the introduction of a Universal Payment Interface ( UPI) to reform financial sectors. The government has introduced the recapitalization of banks, enhanced regulation, and support for non-banking financial companies to ensure the flow of credit.
In conclusion, during the lockdown Indian economy faced many losses in almost every sector of the economy, however, the government has provided budgetary strategies aimed to provide immediate relief, stimulating demand, and bringing investment.
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