Future Generali

How can the economy be boosted in the current scenario?

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Rakesh Wadhwa:

Since last year, agriculture has grown at about two to three times. From your study, the hope is actually on agriculture to do well. And in turn impact the consumption because that's 50% of the total spend. Well, imagine if it does not pick up, the question is, what would you recommend the government should do to kickstart the economy?

 

Rama Bijapurkar:

Firstly agriculture is not 50% of the spend. It is 50% of the population and it accounts for a 30% of rural spend. So it's 30% of 50%, about 20% of the total spend. Okay. So, even if agriculture does well, the middle class are not going to save everybody. They might save some companies to some extent, but not to the others. So when it does well, you will see an upside from the nonagricultural sector when it does badly, you will see a downside. Right now, I don't think anybody's in a position to take the upside of it.

Everyone says, why don't you stimulate consumption? But my point is that if you stimulate consumption directly with transfers, then you're giving a glucose shot to a very weak corporate supply side, right? The supply side is too weak and a glucose short is not going to do it. So I think there's a punt from the supply side and if that punt works, then we have a better chance of, you know, restarting the economy, which is very, very widespread in terms of income implications. I have heard people saying  “Why don't you use this time to actually do good public works and build schools and build hospitals and get to health sector in order, in which case it'll take care of things”

I think every little bit will go a long way because luckily we're very spread out.

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