Re-imagining government of India’s policies for India’s physical infrastructure development in post COVID-19 scenario.

Abstract

The April-June quarter brought nightmares to most of the major economies of the world when their GDP plunged into deep contractions. India too recorded fall in real GDP (Gross Domestic Product) in the quarter and it was lowest at -23.9 percent, which the Reserve Bank of India (RBI) called as “historic technical recession”. The contraction in GDP continued in the next quarter i.e. Q2 and was recorded as -7.5 percent. This situation didn’t improve much even in Q3 and GDP was recorded at +0.4%. If the contraction in GDP continued even in the third consecutive quarter of this fiscal year, Indian economy could have gone into a full-fledged recession – which would have been the fourth recession since independence, first since liberalization, and possibly the worst in India’s independent history. Even when the pandemic hasn’t outbroken, the economy was already slowing down, with deficiencies very evident in both consumption and investment demand. In recent times in India, consumption and investment have been the main drivers of growth. Though earlier export had been an important contributor in India’s growth story, in the immediate aftermath of the pandemic its contribution in GDP numbers needs to be re-evaluated since the global economy is becoming more protectionist too. Although, government of India through its numerous schemes such as Make-in-India, Ease of Doing Business, Start-up-India, etc. tried hard to bolster manufacturing, but the sector failed to grow, leaving services sector to step up but due to lack of demand, all segments irrespective of their economic nature got hit hard. The pandemic, as an external shock, finally contracted the economy. The contraction in Indian economy adversely affected the marginalized section of the society the hardest leading to widening of the prevalent inequality in Indian economy. Due to the domino effect, the marginalized section of the population is stuck in vicious cycle of poverty with low demand, ballooning of unemployment, rising inflation, etc. causing immense damage to overall prospects of Indian economy. In such a scenario, as a short-term measure from government should be to immediately support economy through release of fiscal stimulus to the most affected sections of the society. As a medium- and long-term measure, a sustainable and resilient growth plan based on private as well as public spending is required to have multiplier effect on job creation in the Indian economy and hence infrastructure development, for any country specially for a developing nation like India is an important step forward to accelerate country’s growth wheel. The infrastructure sectors which are studied in this policy paper includes rural and urban infrastructure, housing, roads, railways, ports, airports, healthcare and others.