Table of Contents
The News
- The ‘state of the Economy’ Chapter in the Economic Survey, 2021-22 commences with the analysis of advance estimates released by National Statistical Office (NSO) placing India’s real GDP growth in 2021-22 at 9.2%.
- At this growth rate, the Survey observes that the Indian economy will recover past its pre-pandemic output level of 2019-20.
- In an environment of extreme uncertainty, the Survey underscores the effectiveness of the government’s unique policy response in enabling India’s swift economic recovery. India’s economic response during this phase was based on the framework of Barbell strategy, safety nets & agile approach.
What is this agile approach?
- This barbell strategy calibrated with quick responses and adjustments to an evolving situation based on a continuous feedback mechanism and Bayesian updating of information on one end and hedges for worst outcomes on the other end.
- The iterative leg of “Barbell” strategy is the “Agile” approach.
What is this agile approach?
How govt employed agile strategy?
- A key enabler of the feedback-loop based Agile approach in India’s policy response is the “availability of real-time data”.
- Since 2020, the government has been leveraging a host of eighty High Frequency Indicators (HFIs) representing industry, services, global trends, macro-stability indicators and several other activities, from both public and private sources that enabled constant monitoring and iterative adaptations in conditions of unprecedented uncertainty.
- Indicators included GST collections, e-way bill generations, power consumption, mobility indicators, auto sales, rail freight traffic, digital payments, cargo movements, highway toll collections, etc which can be seen in both the EcoSurvey and Monthly Economic Reports of finance ministry.
Will we see agile approach in future?
- The Agile framework in itself does not resolve the problem of uncertainty. The framework itself remains vulnerable to unforeseen shocks.
- That is why the government clubbed it with Barbell strategy. Using this the govt provided a cushion against worst possible outcomes in conditions of massive uncertainty. (PM Garib Kalyan Plan & other safety nets).
India’s Agile v ROW
- The Eco Survey contrasts India’s response with the Keynesian response. Majority of developed nations followed Keynesian policy of providing large fiscal stimulus upfront. (Similar to Waterfall model response)
- However, through use of Agile approach, Indian policymakers chose to calibrate fiscal stimulus based on continuous feedback loop provided by HFIs.
- Based on HFIs, stress sectors were identifies & with early signs of demand recovery calibrated fiscal injections were provided, wherever needed.
- As economic recovery started gaining momentum, Government responded by injecting significant demand stimulus through infrastructure investment that has now gone on to take centre-stage. (See Budget 2022-23)
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