Fiscal and Monetary Policy Responses to Covid-19 Pandemic in India: Impacts and Prospects

Authors: N R Bhanumurthy & O.P.C. Muhammed Rafi

Journal: Aarthika Charche, FPI Journal of Economics and Governance; Volume 5, No.2, July – December 2020, Pages 43-53.

Abstract: In this paper an attempt has been made to review and understand the impacts of various macroeconomic (fiscal and monetary) policy measures introduced in India in the context of Covid-19. We argue that India has adopted timely and broad-based policy measures to mitigate the adverse impacts of the pandemic. As the leading indicators suggest, because of these timely measures, economic revival appears to be much earlier than most analysts predicted. One of the main reasons for this optimism could be due to improved transmission of monetary and fiscal policy changes on to real economic activity. Going forward, we argue that for the whole year, India could achieve a positive nominal GDP growth in 2020-21 while the real GDP growth will depend on the inflation expectations as well as supply responses. Now the focus of the public policy should be on how to improve medium term growth prospects.