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Need to mitigate pandemic’s impact on economy was the main theme of MPC meet
April 22, 2021
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The resurgence of Covid-19 infections and the need to mitigate the pandemic’s impact on the economy was the centerpiece of discussions of the six-member monetary policy committee (MPC) at its meeting held between April 5 and 7.
Shashanka Bhide, Senior Advisor, National Council of Applied Economic Research, Delhi, observed that the pace of recovery of output needed to offset the negative impact of the Covid-19 shock to the economy in terms of growth in income, and employment will be substantial and sustained over many years.
Summary
One of the key drivers of economic recovery in India will be the efficient movement of capital from inefficient firms to efficient ones. The economic downturn caused by the coronavirus pandemic has been severe, and India’s economy was one of the worst affected in 2020–2021. Though the economy is recovering faster than initial estimates, sustained economic recovery will not take place if stressed businesses cannot restructure their debts properly or if failing firms cannot be resolved efficiently. India’s bankruptcy law is key to solving these challenges.
In 2016 India enacted the Insolvency and Bankruptcy Code, 2016 (IBC), which was a landmark reform to the nation’s financial system and the first comprehensive law to regulate insolvency.
In the post-pandemic world, addressing inequality is key to sustaining growth and well-being
COVID-19 in the last one year has once again reminded us of the growing inequalities in India. A recent Pew Research Report shows that India’s middle class may have shrunk by a third due to the novel coronavirus pandemic while the number of poor people earning less than ₹150 per day more than doubled. The Pew report also warned that the situation may actually be worse than estimated because of worsening inequalities. International organisations like the World Bank, the International Monetary Fund and the International Labour Organization have also warned about rising inequalities in several countries including India due to the pandemic.
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