Impact of Economic Reforms: International ratings agencies expect smart economic recovery in India

- Abhishek Dayal,

Director, PIB Imphal

 There is some positive news on the economic front: reputed global rating agencies in their latest reports have taken note of the comprehensive Economic Reforms ushered in by the Indian Government in recent months and they anticipate a smart economic turn-around next year.

Pic; indiatvnews.com

Fitch Ratings agency in a report said on Wednesday (June 10) that Indian economy would register a sharp growth rate of 9.5 per cent next year provided it manages to avoid further deterioration in its financial sector. While a shrinking in GDP is inevitable due to the breakdown in production and supply chains caused by Covid19 pandemic this year, further contraction is likely to be avoided as a result of careful management of the situation. The agency has retained its investment outlook for India, pointing out that to support the economy, the Reserve Bank of India (RBI) has eased monetary policy by cutting policy rates and by providing liquidity through long-term repo operations. Prudential requirements for banks have also been eased to free up liquidity for lending. "The government has announced stimulus measures amounting to 10 per cent of GDP, of which the fiscal component of about 1 per cent of GDP is significantly less than many of India's peers," the rating agency said.

Global rating agency Standard & Poor's (S&P) has also affirmed its rating on India's long-term foreign and local currency sovereign credit, saying the country's economy remains “a long-term outperformer versus peers at a similar level of income”.

In an interview to PTI, government’s Chief Economic Advisor Krishnamurthy Subramanian rejected the rating actions by international agencies, saying that India’s fundamentals demand a much higher investment ratings than what is being given. He was however satisfied to note that the agencies have acknowledged the path-breaking reforms that have been unleashed. He is confident of a smart recovery in the last quarter of this fiscal itself.

On March 25, Prime Minister Narendra Modi had announced a nation-wide lockdown to check the spread of Covid19. The lockdown has been extended a number of times since then, but with progressive removal of restrictions to allow economic activities to get back to normal. A massive exercise was undertaken to ensure that those migrant labourers who wished to go back, reached home safely. Farming was also allowed to operate without a break and it was ensured that the farming season was not affected. Economic support to the weakest sections was ensured through a number of schemes including direct money transfer to Jan Dhan accounts and increased work allocation in MGNREGA. MSMEs, that form a significant part of economic landscape in many regions of the country, have also been supported with radical reforms in this sector. Deep and fundamental reforms in core and strategic sectors will ensure a faster recovery.

Covid19 pandemic has badly hurt the global economy. It has taken a huge toll in terms of lives in a number of industrialised nations. It continues to spread and devastate a large part of the middle income and poor countries of the world. In comparison, timely steps taken by Indian government shielded our country from the worst effects of the pandemic. India’s rate of spread of infection and rate of fatalities is significantly lower than many of the richest countries of the world. Time was purchased to enable our health care system to get itself prepared for any eventuality. Behavioural change has been affected through a sustained public information campaign on ways to prevent the spread of infection. Social distancing, hand washing and wearing of masks in public places has now become a way of life for our countrymen.

The direct communication by Prime Minister through his televised addresses and through his Radio programme, Man Ki Baat, has taken several important messages directly to the people. ‘Aatm Nirbhar Bharat’ is one of the important component of this messaging that combines several inter-related ideas. It is simultaneously a call for collective action at community level to prevent the spread of the virus, a focus on strengthening our domestic industry to make the country strong and a call for boosting our personal resolve to tackle the present challenges with confidence.

India’s economic fundamentals are strong. It is a vibrant economy with a huge market. It has the potential to emerge as one of the richest and most progressive countries in the world. Under the strong leadership of Prime Minister Narendra Modi, the people are confident that our journey of rapid economic growth and social progress will not be halted by the challenge posed by Covid19 pandemic. We shall overcome faster than the world anticipates and will emerge stronger.

12 JUNE 2020

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