Context

The World Economic Outlook released by IMF has projected an impressive 11.5 per cent growth rate for India in 2021, making the country the only major economy of the world to register a double-digit growth this year amidst the coronavirus pandemic.

Highlights of the Report

• • The IMF projections reflected a strong rebound in the economy, which is estimated to have contracted by 8% in 2020 due to the pandemic.
  • India’s economy is projected to grow by 6.8 per cent in 2022 and that of China by 5.6 per cent.
  • India regains the tag of the fastest developing economy of the world.

• The parameters identified for measuring the progress of the economy post pandemic are as follows:

1. How quickly the economy is marching ahead in Physical terms,
2. Increase in growth trajectory by reversing a decline caused during pandemic.

• In order to revive the growth in other areas, there is a need for a fiscal stimulus package in the upcoming Budget.

Major Areas for Bridging Gap with China

• The major challenge for India lies in bridging the gap with China in various areas like  

1. Increase Investment in the infrastructure sector
2. Upward linkage in terms of Health and Education
3. Institutions like NBFCs, MSME’s, etc. have to be given handholding in terms of credit
4. The bureaucracy at the local level need to be decentralised
5. Judicial reform, expansion of judiciary and capacity building
6. Improve Public Employment Ratio

Which areas need to be focussed in the upcoming Budget for speedy revival of Growth?

1. 1. Capitalisation of Banks and creation of bad banks for stressed assets.
   2. Development Financial institutions should be allowed for providing long term credit for infrastructure.
   3. Debt management policies or measures.
   4. Interest subvention scheme for reviving consumer growth.
   5. Focus on twin balance sheet problems for revival of credit growth.

• Twin balance sheet problem refers to the stress on balance sheets of banks due to non-performing assets (NPAs) or bad loans on the one hand, and heavily indebted corporates on the other.

• Investment led growth instead of consumer driven growth.

Reference:

1. https://www.youtube.com/watch?v=21b-6J__630&list=PLVOgwA_DiGzoqQsGjmamTu6f453RWpm_I&index=4