Finally, there do not exist widely agreed assumptions or a unique methodology for estimating potential GDP. These reasons get accentuated in the case of India because of lack of comprehensive and consistent data on employment. 40. The uncertainty surrounding economic activity has heightened in the post-crisis period. India is no exception.
In contrast to the last crisis, counter-cyclical fiscal policy has played a huge role in supporting households and firms through the pandemic. At an EU level, the “general escape clause” of the Stability and Growth Pact (SGP) – Europe’s fiscal framework – was activated. This enables countries to borrow heavily to finance the rising costs of the pandemic.