The return of economic activities and declining active Covid-19 cases in country has raised hopes of recovery. In fact, professor in economics, Sanjeev Mehta is predicting that the agriculture sector will be a leading driver of economic recovery.
He said after lockdown, the government showed renewed interest in agricultural production. “This has increased consumer enthusiasm because the agriculture sector provides an opportunity to reinvest in agriculture and food processing.”
Sanjeev Mehta added that thousands of jobs have been suspended or lost across many sectors. “The gradual resumption of economic activity will help to some extent, but it will take time,” he said.
Sanjeev Mehta pointed out that during these times of crisis, when most sectors in the economy are in a slump, the agriculture sector has risen to become a beacon of hope and has the promise of leading the country’s economic recovery.
“The agriculture sector can not only be leveraged in the process of recovery, but it could also gain from this opportunity by leapfrogging into a new regime of growth, development and enhanced farmer welfare,” he added.
He said with the import substitution push due to covid-19 impact, agriculture will experience a growth surge. “The reverse migration during this time will help to ease labor constraint on this sector. Higher prices will also boost the farmer’s income and consequently the demand.”
According to Sanjeev Mehta, the latest trends in India reflecting manufacturing growth is recovering and reaching pre-covid times which will help some of the export-oriented manufacturing industries in Bhutan, especially Ferro alloys to recover. Tourism and real estate will continue to remain dormant for a longer time, he said. “Overall, I expect the aggregate demand to remain tight; the recovery will be slower. “
He also mentioned that given the strong recessionary impact of the pandemic, the economy has not fared too badly. “The challenges are multiple, primary ones being- expanding fiscal gap, higher unemployment, and rising inflation,” he said, adding all these things put together may have some regressive impact on poverty rate. External debt may not be a critical problem as hydro sector revenue is likely to remain more stable due to the bilateral agreement. “Overall, the economy’s medium may be long term growth potential drifting downwards.”
Further, the economist shared that the obvious answer has to be taking counter cyclical measures- raise public expenditure to build infrastructure using the surplus labor. It will help to remove long term supply constraints as well as create productive employment opportunities.
“This will entail harmonization of growth and equity trade-off. Right pattern of fiscal expansion is the need of the hour. The government may also need to explore the possibility for expenditure cuts in other areas,” he said when asked about the most important action the government should take to help prevent an economic collapse.
However, he said it is definitely not in the next three to five years to get back to pre-pandemic levels of economic activity.
“But, what has fascinated me in this otherwise murky situation is the resilience of financial markets which have so far withstood the pressure in quite an impressive manner,” he said.
Kinley Yonten from Thimphu