The official announcement of the economy downturn with the contraction of 23.9% in the Q1 2021  poses a loaded gun of questions towards the government coupled with the analysis of the shape of  recovery next gate. Several experts have said India is likely to recover V-SHAPED, W-SHAPED,  L-SHAPED, U SHAPED, J-SHAPED and K-SHAPED recovery down the line. Of course, some  are just to mock the situation and actions current government by the critics. For example, M.V.  Rajeev Gowda has lashed out the government for calling the contraction an ‘exogenous shock’  and the situation of crisis as an ‘Act of God’ by adding another alphabet in the soup of recovery  i.e. J-SHAPED which is Jumla (false promises). The situation, according to him, is a result of sheer  economic mismanagement. India may still be able to avert the L-shaped curve which mainly shows  that when the growth collapses, it stays low and stagnant making it an L-shape. The major  argument is around the V-shape recovery that essentially shows the contraction and expansion of  an economy in a quick manner. The stimulus that the government is providing to cushion the  financial management is just a Life Support that they are giving to the economy. The fact that we  cannot call the critics wrong altogether is because at least on some grounds we need to be normal,  right? The rising infection curve and the sinking economic curve (GDP growth) are both the ends  of an extreme situation that India is facing. The economy not only needs stimulus but also a panel  of experts to allocate that fund in a proper direction to revive the economy.  

Montek Singh Alhuwalia explains that it is really difficult to further increase the expenditure  because the tax income is already likely to fall short and on the top of it, the risk of further adding  to the fiscal deficit is also present. But that does not mean the government should not increase the  expenditure because what that can really help us to revive the economy is a series of reforms to  fiscal consolidation and expenditure in this hour to get back the market in its usual style. People  also say that the economy was anyway not doing very well and the virus is just a blow to the  existing situation. This is actually true because in the year 2019-20, the economy grew by 4.2%  against expansion of 6.1% in 2018-19. The so called exogenous shock was not there in the previous year then what made the numbers go down? The consumption demand, investments and exports  were the key behind the numbers of 4.2%. Thankfully, the exports have crashed less than imports  in the last quarter because we were exporting in the countries that were experiencing a flattened  COVID graph such as Singapore, Malaysia and Vietnam. The larger crash of imports was due to  the fact that incomes were substantially hit which paved way for the consumption to be hit too.  

Another shape of recovery in the basket is K-Shaped recovery. This essentially means a growing  gap between Winners and Losers. The best way to justify this shape is the situation of businesses  that are hit during this period and the stock market on the other hand that is being healthy in every  sense i.e. flourishing during this situation too. TN Ninan has explained this very well by pointing  out the giants in the industry that are eating the small players like Jio swallowing most of the  Future Group. The essence of highlighting these things is just that the rising inequality was there  even before COVID, it is just accentuated now. The government is not just escaping the situation  where the big players have the key to the door but fencing it with glass in the name of nationalism  for the public to enter the rink and question the institutional frameworks such as Competition  Commission. This is not just cutting the hands of public to raise voice against the giants  swallowing their share of the pie but also setting a plate, cutting the pie and serving them.  

Aparna Iyer clearly mentions that the government should monetize its assets and holdings in the  public enterprises which is more likely an asset swap where government sells some old holdings  and invests in new projects. Crying over the spilt milk is not the solution anymore. Instead we  should clean the place (revise the reforms in the correct direction), work harder for the milk  (expenditure in the right allocation) and drink it judiciously (pump the economy and then work for  fiscal consolidation). 

The economy is not only suffering because of the infection curve and shift in the consumption  demand but also because just providing the stimulus is not enough. I am again asserting pressure  on this point that there is a dire need of appointing a committee of experts so that they can plan  policies, reforms and action plan to revive our economy. The Keynesian theory of increased  government expansion with lower taxes (not necessarily because government needs certain income  to spend). The stimulus provided by the Modi Government is very much in line with this approach.  The government has to step in, increase the role of private sector, reducing the role of public in  PSUs, encouraging open trade environment and increasing public expenditure in infrastructure.  The growth seems to be V-shape rather than any other from the bowl because the K-Shape is not  just the shape of recovery but a hard pill to swallow where government is not speaking about the  rights of small players. The V-shape that indicates a quick down and up approach is also not very  easy to come and pick a speed towards the upwards direction. It needs right resource (stimulus)  injected in the right part (where the economy need the most to revive) from the right people  (experts) at the right time. The economy will revive at a pace of mostly 5-7% in the next fiscal  year but what we need to fed the non-agricultural youth is a steady and substantial growth of 8%  (suggested by experts) from the year 2022-23 and so on. 

References:

• Indian economy is heading for a K-shaped recovery and it won't be a pretty sight. (2020,  September 5). ThePrint. https://theprint.in/opinion/indian-economy-is-heading-for-a-k shaped-recovery-and-it-wont-be-a-pretty-sight/496170/ 

• India’s economy could yet avert an L-shaped curve from here on. (2020, September 8).  mint. https://www.livemint.com/opinion/online-views/india-s-economy-could-yet-avert an-l-shaped-curve-from-here-on-11599573656562.html 

• Iyer, A. (2020, September 14). Contracting GDP calls for reforms, large asset sales.  mint. https://www.livemint.com/market/mark-to-market/contracting-gdp-calls-for reforms-large-asset-sales-11600043081384.html