As Covid Wanes, Economy Back On Recovery Path

The economy has recovered sharply from the traumatic April-June quarter, when Covid’s second wave caused lockdowns and shutdowns.

- Swaminathan S Anklesaria Aiyar

SWAMINOMICS

This is the time of year when optimistic budget projections usually prove false, tax revenues fall short of expectations, austerity is decreed for government departments, government dues and capital spending are postponed for want of funds, and budgetary fudging of all sorts begins to try and keep the fiscal deficit close to the budget target. But not this year. Thanks to a booming economy, tax revenue has soared beyond all expectations and the fiscal deficit has plummeted.

The economy has recovered sharply from the traumatic April-June quarter, when Covid’s second wave caused lockdowns and shutdowns. At that time the budget projections looked far too optimistic. The RBI cut its GDP growth forecast for the year from 10.5% to 9.5%, and IMF reduced its forecast from 12.5% to 9.5%.

But then the second Covid wave receded as quickly as it had risen (save in Kerala). Consequently, the economy bounced back so strongly that earlier GDP and budget projections may turn out to be too pessimistic, not too optimistic.

This will help the BJP when five states go to the polls four months hence. GDP growth is not a key determinant of state elections, but a booming economy is always better than a sluggish one for the ruling party.