“It isn’t just our dream but our responsibility to ensure that the 21st Century belongs to India. Self-reliant India is the only way ahead”Narendra Modi
Prime Minister Narendra Modi’s fifth address to the nation (May 12, 2020) since the outbreak of COVID-19, brought some interesting and important announcements, including INR 20 Lakh Crore ($266 Billion) stimulus package to the ailing Indian economy, without complete details of the package. He put forward the idea of developing India into a self-reliant nation, and an economy that can successfully face any financial crises of the future. He also spoke about the suffering of workers from the organized and unorganized sector, common people, and the poor during the lockdown. He confirmed, during his 30-minute speech, that several business-friendly reforms would soon be announced. He also announced that Lockdown 4.0, starting from 18th May, would have altogether new and different rules.
The details of the stimulus package would be announced in the coming days by the Finance Minister Nirmala Sitharaman, through pressers. It is difficult to predict the impact of the stimulus package on different sectors, without complete details. Announcing a stimulus package is an appreciable act but the devil lies in the implementation. Arrangement of the money for the package, without missing the fiscal deficit target by a big margin, would be a challenging job. be Many stimulus packages were announced in the past ($ 8 Billion during 2008) also but the implementation was not up to the mark. Monetary policy easing by RBI, post-2008 crisis, led to the rise in NPA due to the government and banks’ mistakes. This time also RBI has reduced the interest rates, and now it is the responsibility of the banks and government to use best practices for business. Let’s look at the focus areas that are likely to be covered in the financial package of the government of India:-
Economy: India has a large unorganized sector, but due to the lack of will and efforts of the successive governments, always contributed, less than its potential, to the government revenues. Efforts are required to upgrade the unorganized sector into the organized sector through reforms and announcing some benefits. About 90 % of India’s workforce works in the unorganized sector, which contributes nearly 50% to the GDP. Any stimulus package that does not give preference to the unorganized sector would be useless. While rolling out the details of the stimulus package, a clear cut bifurcation of the funds, marked for the unorganized sector should be announced. Agriculture employs about 50% of the workforce of the unorganized sector, but its contribution to GDP is quite low. Progressive reforms in agriculture should be introduced to increase its contribution to GDP.
Infrastructure: World-class Infrastructure is a prerequisite for the development of a vibrant economy. A reliable and world-class Infrastructure helps in attracting investors as well as the development of new industrial clusters. In the last decade, India has made good progress in developing the highways, but we still lack high-speed and dedicated highways for freight. The available network of National highways and State Highways is required to be upgraded, with a special focus on the state highways. The development of waterways for the use of commercial transport should also be fast-tracked. Full capacity utilization of the large network of railways, and improving its capacity should be the top agenda.
System: Extensive use of technology in improving the lives of people must be the new mission of the government. India lacks the use of technology, especially at the local administration level. To develop at a faster rate, the synergy between the different components of administration is important. Technology should be used to achieve synergy. A large number of approvals are required for setting up a small business. The businessmen can’t afford to get the approval from the different authorities personally. With the use of technology, the government can streamline business approvals and eliminate the delays in setting up a new business. The use of technology in agriculture can also help in improving productivity.
Vibrant Demography: If India wants to reap the benefit of the demographic dividend, then the government should focus on improving the quality of education. A large number of young people mean a large talent pool, but this talent pool requires quality training to become a world-class innovator. The government should focus on improving the infrastructure in schools and colleges to ensure proper education. The quality of training currently provided at the vocational centers is very poor. Improving the quality of teachers, at all levels, should be the prime agenda in education.
Demand: India has a population of 1.3 billion which is a huge market for every kind of product. The reason companies still are not able to tap the whole market is supply chain constraints. To solve this problem, the government should develop new industrial clusters and encourage the business community to invest in small towns and cities.
It is important to focus on essential and important areas while chalking out a plan for economic revival. It is also important to use feedback to improve the plan. To achieve the goal of self-reliance, the government has to take along everybody. If the government implements the reforms and financial package perfectly then there is no doubt India could become a self-reliant nation.
“Once we have decided that we have to do something we can go miles ahead”Narendra Modi
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