The Finance Ministry’s monthly economic review for January, released on Wednesday, strikes an optimistic note. It highlights how India’s economy may be poised to expand at the fastest pace among major economies in 2022-23, extending its swift recovery from last year’s huge pandemic-induced contraction. The current year, it says, is likely to yield an “economic reset” in a “post-Covid world”, as we keep the health crisis behind us. Driven by production-linked incentives and public capital expenditure, manufacturing and construction are seen as key growth drivers.
While the ministry’s expectation of a “reset” is derived from its policy initiatives, we can also consider the possibility of an extraordinarily strong jump in consumer spending next year, as seen in the early days of the “Spanish flu” in the West Was. 20th century. This was attributed to the psycho-social change, the collective desire to live life to the fullest. Once the threat of covid ends, India’s globalized money will show similar behaviour. Unlike rich countries, our big spenders may be too small to affect aggregate demand much, but it will help the economy equally.
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