Home News Pre-budget quote in regard to the Indian Economy by Professor Vidya Mahambare

Pre-budget quote in regard to the Indian Economy by Professor Vidya Mahambare

by Our Corresspondent - Jan 14, 2022
Pre-budget quote in regard to the Indian Economy by Professor Vidya Mahambare, News, KonexioNetwork.com

The Indian economic recovery is weak and uncertain. Among the four drivers of demand – private consumption, private investment, government demand and exports, the first two cannot be expected to drive the overall recovery in near future. This is because job creation and income generation have been uneven across the sectors with concentrated gains in exports led sectors such as Information technology and hopefully this will continue. The budget should focus on raising the capital spending in physical infrastructure and social sectors such as health, and education, which are also labour intensive, and to frontload it. This would create low-skilled jobs that were lost in sectors construction and would lead to an increase in demand for sectors such as cement, steel, and eventually crowd in private investment as capacity utilisation levels rise.

It is critical to create conditions for low-skilled jobs which may continue to suffer even after the current wave of Omicron is over if corporates continue with work from home policies. People working in the informal sector such as in transport, hotels & restaurants, and housekeeping have jobs when formal sector employees work from the office. If that is not the case, we have to find alternative jobs. While a high allocation to schemes such as NREGA may help, it can only be a temporary solution. 

Continued fiscal support at this juncture is important given that monetary policy tightening is also expected to start globally and in India, in the face of rising inflation. This however, need not result in a higher fiscal deficit to GDP ratio given tax buoyancy from the formal sector.