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The post-COVID-19 Economic Recovery and Fiscal Stance
The Union Budget 2022–23 reflects the possibility of a significant consolidation in the year. As we navigate COVID-19 and the war-induced macroeconomic uncertainties, the realisation of the proposed fiscal consolidation strategy, revenue target, and expenditure allocation priorities would depend on the way the economy navigates these challenges as they unfold.
Helpful research assistance from Dinesh Kumar Nayak and Smriti Mehra is gratefully acknowledged.
While the global economy is battling the economic shock due to the COVID-19 pandemic, the war between Russia and Ukraine has increased global macroeconomic uncertainties manifold. A recent blog (Tryggvi 2022) published by the International Monetary Fund (IMF) notes that inflation “has been higher than expected in many economies, while financial markets remain volatile and geopolitical tensions have increased.”1 It further notes that with reduced growth momentum, “the world needs strong international cooperation to end the pandemic, navigate monetary tightening and shift focus to fiscal sustainability.”2 The likely impact of this war on emerging market economies, including India, will only be known as it unfolds.
The IMF’s blog dated 15 March 20223 mentioned that the impact on the global economy will flow through three channels:
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