Prime Minister Narendra Modi has been exemplary in handling the Covid-19 situation through the lockdown, and then giving the economy a much needed boost through the economic stimulus. The priorities were clear — revival, and then sustainable growth. First save lives and look after the poor, the migrants workers and farmers. Then MSMEs and industry, and finally provide long-awaited reforms. Also, the regulatory rules should facilitate, not hinder, the process.
Finance minister Nirmala Sitharaman has addressed most of these issues. But the measures are skewed towards supply side, and not enough has been done to create demand. Here are some suggestions GoI should consider.
First, in the media, GoI seems to be addressing economists rather than the general public. It should have been more transparent and simple in its communication. Very few of us comprehend the figures that run into thousands of crores. It should have been brought down to understandable terms.
Over days, we heard the government outline well-meaning measures. But it would have helped if a summary of the total the poor were getting was indicated. A lot has been done for farmers. But the migrant workers feel left out. Providing MGNREGA and food is not enough. Perhaps, for 2-3 months, the amount of Rs 500 a month could have been increased to Rs 4,000.
The total outlay would have been negligible — probably less than Rs 10,000 crore. But the perception that GoI was concerned yet not doing much could have been corrected. Again, on trains being provided for migrant workers to return home, the Centre bearing 85% and the states 15% of the cost does not convey the full story. It simply means that the cost of the train is covered, but the workers still have to buy a ticket. Lack of clarity leads to disappointment. All communication could have been brief and clear.
Many measures have been taken for the supply side to open units — loans for MSMEs to pay wages, providing working capital to start production, etc. However, interest rates are very high and will be a deterrent for people to borrow. Not much has been done on the demand side. A balance is required.
Demand is the oil in the engine of industry that starts the virtuous cycle. Even if money is given as loans to MSMEs, they cannot survive without genuine demand for their products. As Sitharaman pointed out, money can be given to people in several forms. Nothing, however, beats direct benefits that people can see and fathom.
Some measures, like reducing tax deducted at source (TDS), are good for the middle classes. But we must incentivise them much more to encourage spending. This can be done by reducing prices through having a flat lowering of GST to, say, 10-12%, and lowering of personal taxes. Purchase of white goods like ACs and cars, or of property, could be incentivised, by conveying that money spent on such products will reduce personal tax by a certain percentage.
We seem to have started the engine of the car. But to get it moving, we must be creative and not just take incremental steps. We should be open about the fact that GDP growth could be as low as 1%, and because revenues will fall, the fiscal deficit could be as high as 6-7%. None of these measures suggested are cast in stone, and if they don’t work, they could be changed.
If India is to attract FDI, then it’s important to aggressively market India. To make ‘Atmanirbhar Bharat’ and ‘Made in India’ come true, we must simplify our rules and leave no room for subjectivity. Ease of doing business can’t be just provided at a macro level, but at the micro level of laws on land and labour.
The PM has laid out a great plan. The issue now is implementation — keeping it simple with no devil in the details. In the words of the 12th-13th century founder of the Mongol empire Genghis Khan, ‘There is no good in anything, until it is finished.’ We, as a people, bureaucrats and politicians should pull together. The opportunity is there, and we must seize the moment. We can’t become prisoners of the past, but pioneers of the future.
The writer is a business consultant