Economics Demystified

Centre’s decision to invoke “Force Majeure” clause for non-payment of State’s due GST compensation for FY 2020-21 is morally unacceptable. The two borrowing options that places the onus of extra borrowing on states to compensate for the revenue shortfalls is not only unconstitutional under 101st constitutional amendment Act, 2016 but also a clear blow to the India’s federal structure in future, going ahead. The experience from the last six months in the way states are handling the pandemic clearly indicates that they are truly “ laboratories of democracy ” as paraphrased by former U.S. Supreme Court Justice Louis Brandeis.   However, the constitutionally defined federalism in India is “quasi federal” in nature with existence of strong unitary bias and asymmetry in the way it works. Be its recent revoking of Article 370 by division of Jammu and Kashmir into two Union Territories without securing State government’s consent or recent passage of the three controversial bills on agric...

As pandemic devastates lives and livelihoods, India is heading towards a disastrous “stagflationary” phase. However, bringing in some key structural reforms remains a silver lining in this unprecedented times, going ahead. India has confirmed   38 lakh COVID-19 cases so far with more than 80000 infections reported daily, making it the world’s third-worst-hit country after US and Brazil. While government deserves an applaud for achieving a low mortality rate of less than 2%, but, in its effort to control rapidly rising infections is imposing fresh lockdowns with some states even observing night curfews and weekend lockdowns.   Hence, as an aftermath of lockdowns and new social distancing norms, economy is gradually getting pushed into state of stagnating growth and accelerating prices, formally known as stagflation. Although, high inflation is seldom accompanied by a period of low growth as typically, a slowing economy would reduce the demand for goods and services, thereby d...