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34 Economic Survey 2021-22

restrictions, lockdowns and supply-chain breakdowns as an interruption of the economy’s
supply-side. Although this also squeezed demand, it is not correct to see the pandemic related
economic slowdown as just a demand problem as happens with most economic cycles. Second,
the post-Covid world will be impacted by a wide variety of factors – changes in technology,
consumer behaviour, geo-politics, supply-chains, climate change and so on. All of these factors
will also interact in unpredictable ways with each other. Therefore, the post-Covid economy will
not be merely a re-inflation of the pre-Covid economy. Simply building it back with demand
measures is not a solution.

1.42 There are two common themes in India’s supply-side strategy: (i) Reforms that improve
flexibility and innovation in order to deal with the long-term unpredictability of the post-Covid
world. This includes factor market reforms; deregulation of sectors like space, drones, geo-
spatial mapping, trade finance factoring; process reforms like those in government procurement
and in telecommunications sector; removal of legacy issues like retrospective tax; privatization
and monetization, creation of physical infrastructure, and so on. (ii) Reforms aimed at improving
the resilience of the Indian economy. These range from climate/environment related policies;
social infrastructure such as public provision of tap water, toilets, basic housing, insurance for
the poor, and so on; support for key industries under Atmanirbhar Bharat; a strong emphasis
on reciprocity in foreign trade agreements, and so on. Some commentators have likened the
Atmanirbhar Bharat approach to a return to old school protectionism. Far from it, the focus on
economic resilience is a pragmatic recognition of the vagaries of international supply-chains
(see discussion in Box 2).

1.43 As the reader may have guessed, the two pronged approach of “flexibility” and “resilience”
is analogous to the Barbell strategy used for the short-term response to the pandemic. This
should not be surprising as they are both attempting to deal with the same issue – uncertainty
about the future flow of events.

Table 7: Key supply side measures/reforms

Sectors Measures/Reforms

Industry l Production Linked Incentive Scheme approved for 13 sectors including
(i) Automobiles and auto components, (ii) Pharmaceuticals drugs, (iii)
Specialty steel, (iv) Telecom & Networking Products, (v) Electronic/
Technology Products, (vi) White Goods (ACs and LEDs), (vii) Food
products, (viii) Textile products: MMF segment and technical textiles, (ix)
High efficiency solar PV modules, (x) Advanced Chemistry Cell battery,
(xi) Manufacturing of medical devices, (xii) Mobile manufacturing &
specified electronic components and (xiii) Critical key starting materials/
Drug intermediaries & Active Pharmaceutical Ingredients
l Retrospective tax repealed to promote tax certainty and foreign
investment.