Credit rating agency, India Ratings and Research (Ind-Ra) in its latest report has said that the major focus of the government to revive the COVID-19 battered economy has till now been on the supply side, but it is high time to change gears and focus on the demand side as well, lest the ongoing recovery begins to lose steam.
As per the agency, the absence of adequate demand may jeopardise the recovery and may even lead to a second-round impact. Even if the supply side gets restored on account of the various measures announced by the government/the Reserve Bank of India (RBI), it may soon run into difficulty due to the lack of adequate demand for goods and services.
On the economic front, Ind-Ra said that the economy has lately shown some green shoots, and several high frequency indicators are reaching the pre-COVID level of production, bolstered by a combination of festive season/pent-up demand. However, the rating agency noted that after two consecutive months of positive growth, a contraction in factory output (Index of Industrial Production) in November 2020 shows the fragility of the ongoing recovery. An appropriate demand-side measure therefore is as important as supply-side measures.