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Indian Monetary Policy post COVID...Fiscal Stimulus and Sustainable Growth

However bad it looks right now, however tough, the World will rise beyond COVID: but the complex interlocking structure of economics and social engagement that makes up our world needs help along the way, help to get through the shocks caused by the pandemic. And that imperative will also further sustain a seismic shift in macroeconomic policy across the globe, especially the role of Big Government. For a generation or more Monetary Policy had been genuflecting at the shrine of Milton Friedman, who once bluntly barked that “Nothing is as permanent as a government programme”. How right he was…we rose from the ashes of the 2008 Financial Crisis through what were then unprecedented fiscal stimulus programmes, and Friedman’s myopic focus on balancing the books suddenly looked old fashioned and just what it was, myopic…short sighted. The age of Big Government was back, and central planners haven’t forgotten the lesson since: because we’re all Keynesians now.


Rebalancing the Indian Economy: ANBP

In the immediate aftermath of the pandemic last May, Prime Minister Modi’s Government introduced what it described as a “judicious mix of fiscal and monetary policy intervention”: the ambitious Aatma Nirbhar Bharat Package (ANBP) has since injected more than $308 Billion into the subcontinent’s economy (equivalent to 10% of GDP): supporting badly hit SMEs, ensuring India could continue to attract what were already historically high levels of Foreign Direct Investment (FDI), and crucially strengthening the spine of the all important Make in India programme ( But building back a better future for India always involved so much more than that single desiccated phrase, “fiscal stimulus”: so lets take a closer look at what ANBP means at ground level for the subcontinent’s economy.


The Daily Impact of ANBP

For a start, those unfortunate enough to lose their jobs when India closed down started to go hungry and couldn’t afford to heat their homes: ANBP payments provided them with food and warmth, as well as vital daily support for their elderly relatives, assistance for increasingly hard pressed agricultural workers and insurance cover for healthcare workers (helping maintain first line response in an already overstretched hospital system). ANBP also delivered funds for construction workers and additional assistance for construction companies, so they could continue (together) to meet what has been a surprising surge in demand for new homes in the post COVID environment. ANBP literally enabled them to build back better…

Small and Medium Sized Enterprises (SMEs) can take advantage of the ANBP Emergency Credit Line Guarantee Scheme, and they certainly haven’t been slow to take up the offer: loans in excess of $27.4 Billion have since been advanced, helping keep businesses going and keeping Indians in work during the dark days of the pandemic. And, perhaps, on a more mundane level, tax filing and other regulatory deadlines have either been relaxed (significantly) or suspended to make running those businesses just a little bit easier. After all, there’s enough to worry about already without having to fill in a seventy three-page tax return, with the in house accountant quarantined at home. One of the reasons to why ANBP has platformed much reduced penalty rates on any overdue GST filings.


A “V” Shaped Recovery

ANBP has now been in place for just over a year…and it’s working: the subcontinent’s economy was already a global economic powerhouse before the pandemic struck, and thanks in large part to central government intervention it is now set for a V shaped recovery. But don’t just take my word for it, according to the second volume this year’s Economic Survey ( “The fundamentals of the Indian economy remain strong as gradual scaling back of lockdowns along with the support of the Atmanirbhar Bharat Project have placed the economy firmly on the path to revival…There has been rapid recovery in economic activity since the COVID-19 pandemic created unprecedented lows in the first quarter of 2020-21, and that recovery is supported by the extraordinary fiscal and monetary support provided by the Government”.

Milton Friedman was right after all: there’s nothing as permanent as a government programme…and ANBP promises a permanent platform for growth.


Executive Overview

India certainly hasn’t been slow to act decisively in the face of the economic challenges posed by COVID lockdowns, and the ANBP initiative is a prime case in point. The success of that programme points to a brighter future ahead…

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Suchit Punnose

Suchit Punnose / About Author

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