Press "Enter" to skip to content

Indian financial system and the attainable trinity of resilience

Sanjana Kadyan and Tulsipriya Rajkumari

By Sanjana Kadyan and Tulsipriya Rajkumari

From a phoenix burnt to ashes rises one other, renewed and reborn. 2020 has been the 12 months of the phoenix for India, a 12 months of deep struggling introduced by an unexampled pandemic, a 12 months that locked humanity’s psychological energies right into a firespiral of uncertainty and despair but additionally a 12 months that unlocked new levers of human resolve and financial resilience.

The unfold and depth of Covid-19 induced twin demand and provide shock revealed startling ranges of socio-economic vulnerabilities throughout sectors of the financial system and geographies. While non-essential sectors predominantly catering to discretionary consumption bore the unpreventable brunt of a full throttle output shock, important ones like agriculture underwent a dampened shock primarily emanating from the oblique impression of restricted actions in non-essential sectors. As demonstrated in Economic Survey, disruptions in home and world provide chains triggered a provide shock of import-intensive agriculture inputs like fertilizers & pesticides, as additionally agricultural exports like rice and spices. Spiralling and broad based mostly meals inflation witnessed within the first quarter of FY21 was, therefore, inescapable.

However, well timed and proactive exemptions from Covid-19 induced restrictions supplied by authorities of India facilitated uninterrupted cropping actions and largely insulated agriculture. Manufacturing sector endured a ubiquitous demand and provide shock penetrating virtually all sub sectors, together with textiles and materials, client items, pc {hardware}, equipment and gear. However, a surge in well being providers boosted the prescription drugs sector, exemplifying the case of heightened alternative in a disaster scenario. Construction and speak to intensive providers sector, notably commerce, tourism and transport had been bothered probably the most as a result of pandemic induced necessities of social distancing. Suppressed demand in down- stream industries like cement and metal had a debilitating impact on mining operations regardless of being exempted from lockdown restrictions.

The geographical unfold of the pandemic induced shock in India was intertwined with the pre-existing financial vulnerabilities of the states. The Economic Survey makes an attempt to interpret this vulnerability as a mixture of Gross Value Added (GVA) shock and labour shock. The highest output contributing state and the Covid epicentre of the nation i.e. Maharashtra grappled with contact-sensitive providers sector shock and labour market stresses with 56% of its output coming from the providers and seven.5% of the nation’s MSMEs positioned within the state.

While Tamil Nadu and Kerala had been comparatively extra uncovered to the development sector shock, a producing slowdown lent dangers to financial restoration in Gujarat and Jammu & Kashmir. Punjab, although sheltered by the comparatively resilient agricultural sector, skilled extreme labour shocks with 62% of its non-agricultural sector being casual. Services led casual sector shocks additionally made states like Delhi and Telangana weak. The ubiquity of development led casual sector shocks was most severely felt in Uttar Pradesh.

While the total impression of the pandemic on the India financial system continues to be unravelling, the financial system has gained macro-resilience at three ranges. Firstly, instantaneous resilience to restrict quick injury was imparted by well timed and pro-active assist of presidency to weak households and companies. Secondly, calibrated fiscal and financial policy-pivoting supplied dynamic resilience to sectors to adapt to new challenges and get better. The third and a very powerful of all is the well being system resilience that Centre, state and native governments in-built response to the pandemic , a important progress engine for the fledgling flight of the new-born phoenix. At the core of this trinity of resilience lies an irrepressible human spirit that strives to seek out its means again to wholeness!

Sanjana Kadyan, Deputy Director, Macro-Economic Division, DEA & Tulsipriya Rajkumari, Deputy Director, Macro-Economic Division, DEA

Be First to Comment

    Leave a Reply

    Your email address will not be published. Required fields are marked *

    %d bloggers like this: