Budget must focus on resolving demand-side issues: Ind-Ra
The budget must redirect the government focus in resolving demand-side issues by moving away from fixing supply-side problem which has been the focus since March when the pandemic began to pummel the economy, says a report.
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Mumbai: The budget must redirect the government focus in resolving demand-side issues by moving away from fixing supply side problem which has been the focus since March when the pandemic began to pummel the economy, says a report.
The pandemic induced lockdowns resulted in the economy tanking 23.9 per cent in the June quarter but made a dramatic recovery with the contraction improving to just 7.5 per cent in Q2 and is likely to re-enter the green zone in the second half which may help the economy close FY21 with a contraction of 7.5-8 per cent.
"It is high time to change gears and focus on the demand side as well, lest the ongoing recovery begins to lose steam. There is nothing wrong in addressing the supply-side issues, as it was necessary to restore/augment the broken supply chains. But, lack of adequate demand may jeopardise the recovery and may even lead to a second-round impact," Sunil Kumar Sinha of India Ratings warned in a note on Friday.
It can be noted that since 2012, consumption demand has been the one of the biggest missing links in an economy that was nearly overheated after the heavy stimulus doses following the 2008 global financial crisis, making companies eschew investments and halt expansions, resulting in lower wage increases and job creation leading to a massive fall in consumption demand.
