The path of economic recovery

     The world economies have collapsed and the poorest of the poor have been exposed to a most vulnerable situation. The pandemic has exposed the fallibility of our institutions and beliefs and shows glaringly how inequities in society create different survival situation in the time of crisis. It is time that the governments of the world intervene and provide necessary emancipation.

    Almost all the governments in this democratic post modern world are necessarily established with the promise of welfare. Even if the government claims to be a capitalist, then also there is a shred of welfare of the few by maintaining law and order. In that sense, we can safely say that the primary purpose of the government is welfare. Keeping this in mind the government must act both as a parent and as a friend towards the people and nurture confidence within them for better times ahead.

    Similar to all the other economies, the Indian economy is also in despair. In order to boost the confidence of the manufacturers and the consumers, the government needs to give a fiscal push. The inflation has gone well above the target of 4+2 %, but this is not the time for the government to sit back and let events unfold. Any target that the experts set would have been for normal times with some risk range, but it would not have been set for handling a crisis because the nature of the crisis is itself uncertain.

    The government must think about the middle class of the country which hugely contributes to the knowledge in the economy. This knowledge has been many a times converted into dividend by contributing to the growth of the economy. Indirect taxes are different from direct taxes and it is a tax that is levied on daily consumption. Burdening the middle class and working class with huge indirect taxes will create a huge demand deficit  in the economy. This will further slow down the economic growth. Increasing the direct taxes without first creating avenues for employment and better income will prove to be burdensome and disastrous. Further many families which have transitioned from the middle class to the bourgeoisie class have also been hit. The pandemic has resulted in close down of hotel chains, multi complexes and malls which has created a huge loss of profit for its owners and the associated unemployment with it. The loss of profit has made the owners fearful in new investment, the banks are reluctant to lend with the prospect of accumulating defaults and bad loans and the consumers are unwilling to spend because of the uncertainty.

    Why do we need a government in a democracy which does not tend to the needs of its people during the crisis? The governments must act quickly by not following too rigidly the fiscal responsibility and kick-start the economy by boosting the demand by means of creating liquidity, invest more in education and health and develop the future of Indian demography. The new education policy is a first step ahead but there are many concerns related to the teachers like their income, security, training and quality which needs to be addressed.