22 September, 2020

Why It's Unfair To Compare 2020 Economic Crisis With That Of 2008

With higher GDP growth, Indian economy was in a better shape in 2008. Things are different in 2020, as the economy already reeled under a slowdown, and higher fiscal deficit.

Then and Now Finance ministers Pranab Mukherjee and Nirmala Sitharaman
Why It's Unfair To Compare 2020 Economic Crisis With That Of 2008
outlookindia.com
2020-05-23T11:20:33+05:30

It is understandable that economists compare 2020 with 2008. Some maintain that the response then was better than what one has seen today. But this may be akin to jumping the gun because there are major differences between the two. The first is that two different prime ministers and two different regimes were in place. In 2008, Manmohan Singh’s hands were tied due to coalition government’s pressures, but he understood economics. In 2020, Narendra Modi has a free hand, but tends to centralise decisions.

The economy was in a better shape then, and the global financial crisis had little impact on Indian banks because they were globally secluded. In 2008, the GDP growth was higher, and the collapse lower—from 6.7 per cent to 5.5 per cent, says Sebastian Morris of IIM-A. Today, it may plummet from 5% to 2-3 per cent, or lower. The size of the required stimulus package was lower in 2008. The government had more fiscal flexibility. Things are different in 2020, as the economy alr­eady reeled under a slowdown, and higher fiscal deficit.

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