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Emerging strongly from the severe impact of covid will be the most important goal for India in 2021. The last nine months have been a testing time on a scale unseen in our independent history. The country faced a stringent lockdown and a gradual normalization. The economic cost of the pandemic is already at an estimated 6.4% of nominal gross domestic product (GDP). But on a wider canvas, it has altered both the geopolitical context and conduct of our economic policy.

While the negative effects of the pandemic have been highlighted often, revival efforts have not been truly appreciated. The Atmanirbhar Bharat Abhiyan (ABA) has laid down a well-thought out path to balance a revival with a structural adjustment of India’s economy. The goal of placing emphasis on micro, small and medium enterprises (MSMEs) is to encourage local entrepreneurship, which thrives on local demand and aspires for global presence.

The initial need of the hour during the lockdown was to give businesses access to liquidity. In this context, the Emergency Credit Line Guarantee Scheme (ECLGS) for MSMEs has been a resounding success, with over 2 trillion being infused in a short span. The subordinated debt plan for equity infusion in MSMEs also had a good response. The release of payments by public sector undertakings to MSMEs also gave them much-needed succour.

Global concern over ensuring smooth food supplies has never been as acute in recent history as during the pandemic. Recent measures taken by the government to reform the farmgate infrastructure are showing results. Contract enforcement has improved, food arrival at mandis is picking up, and the market has been widened. The adoption of digital technology by farmers has increased. A unified market in agricultural products is expected to give a major thrust to allied activities and exports. Agriculture’s good performance has added 87,000 crore to GDP in the first half, and could partially offset the negative output gap.

Another positive is that investments in agricultural technology have seen significant growth in recent years. India’s food retail market is projected to touch 60 trillion by 2023, driven by a shift in consumption away from low-value staples to high-value proteins, dairy products, fruits and vegetables, as incomes rise. We must capture this supply chain by using digital means and strengthening farm-gate infrastructure.

The scale of the humanitarian crisis in the wake of covid called for a multipronged response. The people-centric approach of the ABA deserves praise. Increased allocations under the rural employment guarantee scheme, special relief for migrant workers, tax concessions, faster refunds, low-cost housing and measures to ease the doing of business all helped cushion the impact.

The One Nation, One Ration Card plan has become a reality and 686 million beneficiaries can now obtain foodgrains anywhere in the country.

The emergency support given to non-banking financial companies and mutual funds has helped stabilize financial markets after the mayhem of April. The return of foreign institutional investor participation is also a big positive. Corporate bond spreads, which had hardened in April, have seen a substantial correction. On the whole, monetary and fiscal policy moves have helped restore confidence.

The negative output gap, which entails a loss of demand, needs to be corrected so that supply-side measures play their part. The thrust in ABA 1.0 given to agricultural infrastructure, industrial clusters, logistics, civil aviation, mining, power, health infrastructure, local defence production and private participation in space will have a cascading impact on economic growth.

In the ABA’s second and third phases, demand was addressed through the Atmanirbhar Bharat Rozgar Yojana labour subsidy provided to establishments that are covered under the Employee Provident Fund Act and employ up to 1,000 employees. The 18,000 crore additional outlay for Pradhan Mantri Awaas Yojana (Urban) will boost the construction sector, which has direct demand linkages. Moreover, special interest-free 50-year loans totalling 12,000 crore have been availed by states to boost capital expenditure.

The policy efforts made so far have recognized the need for a structural transformation as the pace of technological disruption has risen sharply after covid struck. The choice of 10 sectors under the production-linked incentives scheme appears well thought out to boost manufacturing and participation in global value chains.

Post-covid, globalization might slow down at the global level, but it is likely to accelerate at regional levels. Also, given the humanitarian crisis we face, philanthropy will have to pitch in to supplement government efforts. Private participation in India’s quest for inclusive growth should increase. Budget 2021 could well set the tone for the next financial year by acting as an enabler of business done with greater ease.

Dinesh Khara is chairman, State Bank of India

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