Time Sequencing

India’s Covid Policy Response – Learnings from previous crisis periods

We recently came across an intriguing note from Prof K.V. Subramanian (ex. Chief Economic Adviser) on India’s Covid policy response which was based on the key lessons learnt from India’s response to the Asian Financial Crisis and Global Financial Crisis (GFC). Much has been spoken about the measured policy response by the government in India vs some of the developed economies which largely relied on direct cash transfers to consumers to stimulate the economy. Before deep diving into the global and domestic macro and markets, we thought summarizing some of the key points from the note would be essential, as it helps to understand whether we are headed towards a stable growth-inflation regime from a longer-term perspective or are we kicking the can down the road to address short term problems (i.e. solution for near term growth concerns albeit inflation becomes a concern in the longer term).

The key points in the following note revolve around – a) macro principles which leads to policy making, b) how it all played out in previous crisis periods and c) the reaction functions.