The great depression started in 1929 and it took world months to overcome this crisis. Beginning from United States, It was a severe economic depression, major cause of this depression were few, for e.g
(1) Income inequality was increasing
(2) After effect of World war-1
(3) Severe drought hit the US and Canadian prairies
(4) The Smoot-Hawley tariff act
Initially it was implemented with the intention of protecting US companies but the nature of tax was such that it forced other Nations to stop exporting goods to the US. So the effect was that it further reduced production and revenue of all such firm. Several measures were taken but great depression of 1929 defied all. To end this crisis Nations finally relied on Keynesian economics, It says government should increase demand to boost growth, It supports the expansionary fiscal policy, advocates spending on infrastructure, education and unemployment benefits. Although it had some shortcomings (for e.g it increases inflation) but it worked well and somehow world economy could revive. In present scenario COVID-19 has created similar situation before the world. However reason of this slowdown is different, now to boost demand, Nations across the world is again depending upon Keynesian school of economics. Taking cue from others, Government of India also announced 20 lacs crore stimulus package. But why even this gigantic relief package could not cheer up Sensex and Nifty? Economists are disappointed that no significant measures to boost consumption and infrastructure in 20 lakh crore package were taken, small amount will come from government spending, this package included liquidity measures which was already announced by the RBI.
Economic situation of Indian economy looks grim and GOI has to react now. But what should be the next course of action??
