On Thursday, Finance Minister Nirmala Sitharaman announced a V-shaped pattern of recovery is being seen in several high-frequency indicators, various measures taken by the government being the driving force to revive economic growth, hit hard by the outbreak of COVID-19 pandemic. She said several low-income and developing countries are confronted with the challenge to protect and ensure livelihood for millions slipping below the poverty line, In her address through video conference, to the plenary meeting of the International Monetary and Financial Committee (IMFC), the ministerial-level committee of the International Monetary Fund (IMF).
Nirmala Sitharaman in a finance Ministry statement mentioned that recovery and rehabilitation efforts in these countries must not be allowed to be undermined in any manner.
The finance minister highlighted the measures under the ‘Aatmanirbhar Bharat’ package to foster a quick and more robust economic recovery in India.
The manufacturing PMI that reached the highest level in the last eight years in the month of September 2020, was highlighted by the finance minister, presenting a strong recovery prospect for the manufacturing sector, along with that she also mentioned the V-shaped pattern of recovery that is being seen in several high-frequency indicators.
She said measures worth USD 10 billion have been announced recently in order to stimulate consumer spending
Rs 73,000 crore package was announced by the government, earlier this week, including advance payment of a part of wages to central government employees and cash in lieu of leave travel concession (LTC), to facilitate consumer demand and investment in the economy damaged by the current crisis.
The minister conjointly complimented International Monetary Fund’s manager Kristalina Georgieva and also the IMF for providing wise counsel to the economies across the world and felt that IMF’s assertion that a premature withdrawal of policy support might trigger liquidity shortfalls and insolvencies has relevancy, the statement mentioned.
The discussions at the meeting were supportive of International Monetary Fund Managing Director’s international Policy Agenda titled “Catalyzing a Resilient Recovery”, it added.
The actions and measures are taken by member countries to combat COVID-19 and its adverse impacts were updated by the members of the IMFC.
The IMFC meets doubly a year, once throughout the fund-bank spring conferences in Gregorian ca calendar month, and once more throughout the annual conferences in Oct. It discusses matters of common concern touching the world economy and advises the International Monetary Fund on the direction of its work.
This year, because of the COVID-19 happening, each the spring and annual conferences passed off through video conference.
Why India needs more than a V-shaped recovery to overcome the recession
RECESSIONS & RECOVERIES
Almost all recessions that the world has seen including the Great Depression — a decade-long economic storm — ended with higher employment generation, lowering of taxes and better investment in infrastructure projects.
Even in the case of the Great Depression, there was a period of sharp growth recovery initially, following which things got worse for almost a decade.
Most modern-day economists blame the US Federal Reserve for contractionary policy measures during the time. There was hardly any policy response; no steps were taken to increase spending, and unemployment soared.
So a V-shaped recovery, which is considered a fairly good outcome for recession-hit economies, needs to be supported with additional stimulus and fresh policy measures directed at creating jobs and demand — the two key ingredients for economic recovery.
Although the challenges during the present Covid-19 crisis are in stark contrast to the ones during the Great Depression, the fundamentals remain the same. A recession-hit economy can only recover with rapid job creation, higher demand growth and allocation of stimulus in key industries.
Even if India witnesses a V-shaped recovery, sustaining it will be the real challenge as the government seems to have hit the brakes on spending to revive the economy.
Govt spending declines even as the Indian economy remains in reverse gear In such a scenario, a period of high growth can be followed by a prolonged slowdown, especially when the pandemic shows no signs of slowing down in the country. India has so far registered over 73 lakh cases despite months of the strictest lockdown in the world.