Lastly, economists participating in the survey believed that improvement in personal consumption is highly contingent upon successful administration of the COVID-19 vaccine. Increased precautionary savings are likely to continue in the meantime. Persistent job losses and salary cuts in some sectors have prodded consumers to remain cautious.
Economists emphasized the need for continuation of an accommodative stance of monetary policy for some more time.
Key Global Trends in 2021:
The respondents believed that large scale global vaccination programme against COVID-19 and gradual normalization and recovery of the world economy will be the highlight of the year 2021.
Participants expect a synchronized global growth recovery supported by continued fiscal and monetary stimulus in 2021.
Economists participating in the survey were deeply concerned about the global liquidity situation which, at present, is significantly in surplus and is finding ways to enter asset markets. The participants called upon global central banks to remain watchful of the situation and not allow overheating of markets.
Despite optimism on the growth front, economists cited persistent risks to unemployment and therefore felt the need for continuous monitoring on that front.
In addition, respondents to the survey emphasized that geo-politics and the resultant impact on trade flows will be keenly looked at especially given the change in the US administration in January 2021. They believed that global trade and value chains will undergo significant changes with positive economic implications during the year.
Participating economists indicated that as the world commences mass vaccination drive to fight the pandemic, focus of policy makers will now shift towards the next big challenge at hand, preserving the environment and addressing climate change.
Expectations from Union Budget 2021-22:
Union Budget 2021-22 will be announced in less than a week. The participating economists were asked to share their expectations from the Union Budget for driving growth and development of the country. A majority of the participating economists suggested the following:
(a) Increased public expenditure on building infrastructure. They suggested that the government restructure its expenditure in favour of capital spending (in roads, railways, urban and rural infrastructure, housing) along with providing a clear roadmap and financing plans of the National Infrastructure Pipeline announced in the latter part of 2019.
(b) To enhance revenue collections, economists suggested that government utilizes the current buoyancy in market sentiments to their favour by pushing for disinvestments.
(c) Need for continuous focus towards ease of doing business while simultaneously reducing the cost of doing business in India.
(b) A relief package for the services industry particularly those which were most impacted/continue to be deeply impacted by the pandemic including travel & tourism, hospitality, transport, education and healthcare sectors. Economists participating in the survey have called for increased budget allocation for critical social sectors such as health and education given the current situation.
(e) Agriculture and allied activities sector require continuous focus with consolidation of reforms. Spending on creation of agriculture infrastructure must be expedited which would result in enhanced capacity of cold storage and warehousing facilities in the country. Allocation of additional funds towards food processing schemes along with incentives for agri-exports.
(f) Employment creation and consumption revival remain the key areas for ensuring a sustainable turnaround in economic prospects. Therefore, they called upon the government to announce temporary fiscal stimulus to support consumption in the form of income tax breaks or direct income transfers.
(g)To ease the employment situation in both rural as well as urban areas, greater budget allocations to MGNREGA along with introduction of an urban employment guarantee scheme similar to its rural equivalent.
(h) Adequate recapitalization of public sector banks is also required and should be included in the upcoming budget.