Three key medium-term questions on the economy

GDP numbers for the first quarter of 2021-22 will be released on August 31. In its latest resolution, the Monetary Policy Committee of the Reserve Bank of India projected 21.4% growth in the quarter. This will not make up for the 24.4% contraction in the same period last year. Other forecasters, such as State Bank of India’s chief economist have projected lower growth rates. The only reason these numbers have not set alarm bells ringing is because the June quarter saw a big disruption due to the second wave of Covid-19 infections.

There is a view, especially within the government, about the inevitability of economic activity gathering momentum going forward. The biggest proof of this is the government’s roll-out of National Monetisation Pipeline (NMP) for the next four years (from 2021-22 to 2024-25) this week. NMP is basically an exercise in leasing public assets to private players at a pre-determined price. The government expects to raise ₹6 lakh crore from this exercise over the period.

Any such exercise only makes sense if the government can convince bidders that the economy will do well in the future. It is for this reason that the estimated proceeds have been qualified in the press release announcing the NMP. “The monetisation value that is expected to be realised by the public asset owner through the asset monetisation process, may either be in form of upfront accruals or by way of private sector investment. The potential value assessed under NMP is only an indicative high-level estimate based on thumb rules”, the release said.

But what is the real state of the macro economy?