Trust people to deliver the extraordinary

If we analyse the growth of big world economies, we find a common thread that the people have made those economies what they are. The Government needs to be only a positive facilitator. Now is the time to trust people and they will deliver.

 

For the weaker sections of the society, the Government of India has already announced a relief package of Rs 1.70 lakh crore which includes both food being supplied and direct cash transfer. Renowned economist Raghuram Rajan has said that there would be a further requirement of Rs 65,000 crore for the weaker sections.

I am assuming that this figure may be in the range of Rs 1 lakh crore. Government can go for additional borrowing to the tune of around 0.50 per cent of the GDP and support the poor people especially farmers and labourers further through direct cash transfers and food subsidy.

 

There is a big worry across sectors about the lack of demand in different categories in non-essential sectors. Government needs to find out ways to stimulate demand especially in sectors such as automobile, real estate, consumer goods etc. Though the steps mentioned in point No 1 & 2 will in a major way to spur the demand, but Government can step in to further take it forward. It can provide tax credit/other credits to people on purchase of such things. A formula can be worked out based on various categories and the credits can be offered accordingly. This will greatly help the retail sector and protect crores of jobs.

 

Alternatively, Government can bear the interest or sub vent the interest on purchase of new house, car, two wheelers or consumer goods for a period of 2 years. Assuming new credit of Rs 1.5/2 lakh crore in these categories the additional cost to the Government will be only Rs 16,000 crore per year. Whereas the GST in return will be higher, so a real winner for Government of India. But this can stimulate the demand for non-essential categories in a huge manner.

Government should front end large infrastructure projects to spur the demand in steel and cement sector.

The real estate sector needs immediate financial support in the form of liberal credit. These two sectors along with the automobile sector are huge providers of employment and also have the potential to spur many other industries and it would have a chain reaction in increasing demand in other sectors.

 

Government should aggressively pursue both FDI and bringing big manufacturing to India. The corporates/banks should also be encouraged and pushed to access the cheap capital abroad. The permissions should be granted and executed at lightning speed. There are many other measures which can be undertaken to bring back the economic activity on track. This is a once in a 100 year opportunity for India to cement its place in the big boys club of the economic world. It should be done quickly and swiftly. As the Great British economist John Keynes once wrote in 1923, “In the long run we are all dead”. India needs to rise like a phoenix and I am sure it will.