What Does the COVID-19 Experience Tell Us about Indian Growth Drivers?

ABSTRACT

In India’s battle with COVID-19, recovery was largely under-predicted and financial sector distress over-predicted on the view that more structural reforms were a prerequisite for growth. Inferences derived from better-than-expected outcomes are that beyond fundamental reforms, sustaining Indian growth requires continued fiscal supply-side action that reduces costs of doing business and inflation, allowing monetary policy to keep real interest rates below growth rates, thus stimulating demand and allowing public debt ratios to fall. External shocks have to be smoothed, while avoiding large domestic policy shocks in order to lower growth volatility and undertaking only feasible complementary reforms. © 2022 Economic and Political Weekly. All rights reserved.