Thread by @Roshanjnu

1/n: My @CASIPenn Working Paper : Deceleration, Pandemic, Recession: Does India have a Plan? has been officially published now. You can read it here.

Here is a short thread summarising the arguments.

casi.sas.upenn.edu/content/decele…

2/n: India’s economic pain due to the pandemic will be larger due to two reasons. Our economy was caught in a sharp deceleration phase even before COVID-19 hit. This means both businesses & the govt don’t have enough ammunition to fight the pandemic.

3/n: Our health & social security coverage is extremely poor. This will significantly increase the cost of coping with illnesses and job losses, which have affected millions of workers by now.

4/n: I do look at existing literature on India’s growth slowdown & make an argument that while fixing India’s financial sector mess is a necessary condition for rejuvenating growth, it isn’t a sufficient condition. What the Indian economy needs is a sustainable source of demand

5/n: The govt’s response to the pandemic has focused in supply side and liquidity related measures rather than demand. The so-called package is 10% of GDP. It’s fiscal impact (when it was announced) 1%. This is unlikely to help.

6/n: Finally, I ask the question which has perplexed many of us. Why does the Modi govt do things (demonetisation, ill-prepared GST, inadequate response to pandemic etc.) which hurt rather than help the economy? Of course there’s a lot of nuance in the answer to this question ..

7/n: But two things stand out. Polarisation is an in built political insurance for this regime. Proof: 5 years of Sabka Sath, Sabka Vikas & religious polarisation in 2019> in 2014.

8/n: The fetish with hasty pro-business reforms - last year’s corporate tax cut, which left a big fiscal hole without boosting growth, was designed in 36 hours - is the reflection of a self serving dogma of Gujarat Model as a solution to India’s political economy challenges

9/n: Therefore, I argue, the policy regime won’t change because more & more economists are turning critical. It is the opposition which will have to build pressure on the government; pressure which can hurt the BJP politically. Unless that happens don’t expect much change.

10/n: Finally, some acknowledgements are in order. First & foremost everybody at @CASIPenn who made sure that the only thing I needed to worry about while there (during a lockdown) was what to read & wrote.

11/n: Can’t name them all, but thanks @the_orienteer for offering me the fellowship, Juliana for taking care of everything, @tariqthachil for the wonderful note & all the support. Special thanks to @MilanV @sharanidli & Gautam for their perceptive comments on the first draft.

n/n: Looking forward to everybody’s comments and criticisms on the paper. Like I promised @tariqthachil in our only meeting (in a park) before I left Philly, I hope to do more long form writing in the future. But really glad that this one is finally out