Diwali brings hopes for economic revival

The festival of lights, Diwali or Deepavali, brings joy despite our many problems. For a while we forget our worries and celebrate sharing our happiness with others. So, let me list some positives today.

The spread of Covid-19 has been contained in most parts of our country. The daily reports of new cases, deaths, and active cases have been going down everywhere, except in Delhi. Pfizer, a leading pharmaceutical manufacturer, has reported encouraging results during trials of its vaccine for Covid-19. Many other companies are also making substantial progress in developing a vaccine.  Hopefully, in the coming months, the vaccine availability will increase thus reducing chances of grave health issues or lockdowns. 

Many economic indicators such as GST collections, e-way bills, electricity consumption, bank credit, index of industrial production, purchasing managers index, freight collections by the railways, and fuel consumption in September and October showed a revival of economic activity better than expected earlier. Many analysts say the revival is well entrenched in several sectors and it is not just pent up demand that is helping the growth. Lower interest rates, abundant liquidity in the system, deep discounts to push through sales, and festival demand have helped revive consumption somewhat.

The Finance Ministry has announced a package of measures to help employers hire more people, stressed business entities get loans easily and home buyers get better income tax dispensation. An important announcement is to give Rs 1.45 trillion as Production Linked Incentives to select sectors. 

Another one of interest to project exporters is grant of Rs 30 crore the to Export of Import Bank of India for extending more lines of credit. The new package also contains measures to help farmers, lift rural incomes, develop Indian Covid-19 vaccines, fund infrastructure, and so on.

The Central Board of Indirect Taxes and Customs (CBIC) has tweaked the rules for e-invoicing and the disciplines for furnishing the returns with a view to curb evasion and incorrect availing of input tax credit.  

The Bihar election results have strengthened the hands of the Prime Minister raising expectations that he will not hesitate to take hard decisions to push through more reforms. The tensions at the borders may abate with the advent of winter and a greater realisation that use of force or escalations of tensions are not good options.

It is near certain that Joe Biden will be the next President of the United States. His administration is likely to strengthen the international institutions like the United Nations, World Health Organization, World Trade Organization etc., work more closely with allies and countries with shared values to counter the threats posed by the  rise of a belligerent China, join the Paris agreement on climate change, reduce the trade tensions, ease the policies for allowing skilled workers from abroad to work in the US, streamline the policies for immigration and engage with other countries, especially the democracies, more constructively. 

Of course, there are challenges ahead. Europe is reeling under a second wave of Covid-19. Investment in new projects is low.  The state of government finances or the financial health of many business entities or banks is not robust. So, it could be a while before the growth rate rebounds to 2019-20 levels. Even so, it is with expectations of better days ahead that we celebrate this Diwali. 

Email : tncrajagopalan@gmail.com