Do we really want a repeat of the Roaring Twenties?

The Spanish flu in 1918-19 "led to the decade of the Roaring Twenties, the 1920s", wrote BJP Lok Sabha MP Jayant Sinha. "Entertainment, art and music flourished", "the adoption of new life-altering technologies accelerated", spending on construction increased "to rebuild the cities, roads, and bridges devastated by World War I". As the Covid-19 pandemic comes under control, "we are likely to see another such decade: the Roaring Twenties of the 21st century," as "Cooped up consumers are ready to spend", new technologies like 5G and AI are taking off and "central banks unleashed a tidal wave of liquidity". This is going to be India's Roaring Twenties. We hope so, but "The household consumption is going to be negatively impacted over 2020 and 2021," said the Boston Consulting Group. Household expenditure is expected to rise by 40% by 2030 but it will be 7-8% lower than pre-Covid estimate. "Experts believe retail inflation is likely to average around 6.3 percent this fiscal and mostly will remain sticky going forward owing to pick-up in demand across sectors." Lower food inflation, muted demand and base effect will drive retail inflation to 4.5-5% in 2021, said Nomura, but "core inflation will remain sticky at 5 percent, in 2021 as rising commodity input cost pressure amid firming demand lead to a gradual return of firm pricing power". The Monetary Policy Committee (MPC) of the Reserve Bank (RBI) warned that "short-term interest rates falling below the desired levels raising the risk of financial instability", and "rising pricing power of oligopolistic businesses and commodity prices" will result in inflation. A few companies controlling entire sectors will form cartels and raise prices. "The worry is that dominance by a handful of capitalists may not leave enough space for others," wrote Andy Mukherjee. "But then, who's is even ready or willing to compete, especially in sectors where state policy has a big role in determining winners?" Without increased government support India will lose $300 billion dollars of income in two years, wrote Jehangir Aziz. "The Indian economy was in one of its worst ever deceleration phases even before the pandemic," wrote Roshan Kishore. "It was 8.2% in March 2018 and fell to 3.1% in March 2020." Sudipto Mundle suggests an easy way to increase government expenditure while reducing fiscal deficit at the same time. Assuming nominal GDP growth of 15% in 2021-2022 and inflation rate of 5%, revenue will grow by 15%, so government expenditure can grow at 12% which will stimulate the economy and reduce fiscal deficit. The Budget has a habit of presuming ridiculously high GDP growth on which it calculates tax collections and then encourages tax terrorism. Hundred years ago the Roaring Twenties ended with the Wall Street crash on 29 October 1929 which led to the Great Depression and World War II. Is Mr Sinha indirectly hinting that is what lies in store for us? He wouldn't dare upset Dear Leader, of course. Would he?