Some Aspects of Impact of Lockdown in India and the Way Forward

There has been a huge fall in employment opportunity and income of people following the COVID-19-induced lockdown. As a result of this the economy is suffering severely from the aggregate demand problem. The credit-deposit ratio at aggregate level remained low despite Atmanirbhar Bharat Abhiyan package to boost demand for credit. The solution lies in the expansionary fiscal policy. Substantial increase in the health expenditure and that on the employment of last resort programme to reduce poverty is the need of the hour. However, the exchequer is suffering from a huge revenue shortfall. The foreign exchange reserve of the RBI has crossed 23% of GDP mainly because of the net foreign capital inflow in India. It is argued in this chapter that the fiscal conservative position would be imprudent under demand depression. Instead of showing desperation for selling public sector assets, the Government may monetise part of the fiscal deficit by borrowing from the RBI utilising part of the idle assets in terms of the foreign exchange reserve. It would not cause any demand-pull inflation under a demand constrained situation. Rather, it would ensure faster recovery of the aggregate demand, level of activity and employment in the economy. This, in turn, would also help in making the future stream of Government revenues buoyant and would help in reducing fiscal deficit and public debt as the proportions of GDP in the near future. © 2022 selection and editorial matter, Indranil De, Soumyadip Chattopadhyay, Hippu Salk Kristle Nathan, and Kingshuk Sarkar;individual chapters, the contributors.