India’s Policy Bailouts from the COVID-19 Economic Crisis: Evolution of Monetary and Fiscal Policies Since the Pandemic

Abstract

India and the world went through a public health and humanitarian crisis due to the outbreak of the COVID-19 pandemic in 2020. This article aims to understand the various instruments deployed for tackling the economic side of the crisis and their impacts. It discusses the monetary policy measures that could have been appropriate to tackle the pandemic and the policies deployed by the Reserve Bank of India (RBI) in conjunction with the fiscal stimulus by the government. Subsequently, it discusses fiscal stimulus packages, the need to direct them from the suppliers’ end, and other subsistence policy measures such as food crop transfers and adjustments in federal fund allocations. Policy recommendations discuss the role and importance of stakeholder engagement and investment in the healthcare sector for capacity enhancement and job creation as a short-term relief plan and for a post-pandemic sustainable exit for appropriately handling the pandemics that may follow in the future, respectively. The conclusion advocates the adoption of a policy mix. Then it discusses further challenges, such as the non-availability of literature on the impact of non-traditional policy solutions and the establishment of mechanisms to quickly test policies’ operational feasibility. It culminates with the emphasis on the paradigm shift in the joint approach of the government and the RBI to put the economy back on the trajectory of high growth, which was severely impacted by the sudden and unanticipated pandemic shock, and the way ahead toward becoming a global economic superpower.