It is now a well known fact that Corona Pandemic has devastated the Indian Economy, disrupting not only the informal sector but also the formal one. The GOI has launched a ₹20 lakh crore stimulus package including both fiscal and monetary measures called Atma Nirbhar Bharat Package to rescue the Indian Economy. The real direct cash benefits from the current package by the GOI as estimated by various experts is to be around ₹2.5 lakh crore, roughly equivalent to 1-1.5% of Indian GDP, not 10% as pointed out by the government. Now the questions arise, Is the tactics adopted by the GOI tenable for the current times and what is the best way forward to rescue the Economy reeling under due to Pandemic and prepare for such hard times in future.
Economic Package- A Relief or an illusion?
The current situation is a mixture of supply-side and demand-side disruptions, so the Economic stimulus in this situation will be small, no matter how big it is given. It is a matter of the fact that the stimulus provided by GOI falls short of the expectations of the market and the people.
To answer the First Question, we first have to analyse the Current situation. Today, in the midst of the pandemic, the first priority of every Government is to mitigate the current health crisis at the same time focussing on the state of the Economy. We crave for the status quo, but the current situation advocates for change in the way we use to live and in our older habits, so even if might think of resuming the Economic activities at the pre-Pandemic levels, we cannot achieve it given the social-distancing norms and other concern of a second outbreak. To provide direct credit facility in a situation of demand constraint would be a better option but in this context the Stimulus package which provides for collateral free loans to MSMEs (most-affected by the current disruption) guaranteed by the GOI and more of long-term measures, instead of direct cash-transfers and short-term measures to address the issue is a better option until we know how to reopen the economy because we need less economic activity, not more.
If for instance we would have provided for a direct cash transfer to these entities, these might not transform into increased production because when there is no demand, there is no production (Law of Basic Economics). Here, the government hit the bulls eye by giving onus to the banks and market to choose who to give and how much to give, so that only those firms avail this option who are really in a dire need of fiscal stimulus to sustain.
As Government is considered to be the spender of the last resort, the idea of Helicopter Money, would have downgraded the credit ratings of India, and that will constrain the government's ability to spend through the borrowings from foreign entities when it might actually be the time to spend - maybe six, 12 or 18 months from now.
In this case the decision to spend money wisely from a strained exchequer is a right move by the GOI, that said, we cannot deny the fact that more spending will probably be required, to provide a direct-cash transfer to the poor and providing basic amenities to those in need, if the situation persists.
Rural India- A forgotten concept
The sight of hundreds of thousands of Migrant workers travelling to their hometowns due stalled activities in urban areas is still afresh in our minds. The brunt these people (considered as others) have to face due to sudden lockdown, with added difficulties related to short supply of basic amenities, forced them to migrate. But this has shown us the reality of today's India, a poor, jobless and facility-less suburb.
We have many times debated about the importance of Indian culture, it's traditions and values, but how can we forget what these all things have in common? A strong countryside. In the world of fast growth and urbanization, we have forgotten the idea of harnessing the potential of rural India.
So to answer the Second question, we first have to analyse what we have been doing all these years and what could be the difference if we might have adopted a different approach?
Since Independence, India was committed to make itself a welfare state and for that our leaders thought Industrialisation would be the best way to did it. Through all those five year plans we had adopted in our 1950s until 1980s, we failed consistently to industrialise due to a flawed concept of More Government, Less Governance. In 1991, we did take a transforming step in the face of LPG reforms, but, it is the fact that LPG reforms gave us a jobless Growth. So, what had we missed all those years?
We were so engrossed into Industrialization that we forgot what we were, a poor, devastated and an agricultural Economy. In the enthusiasm to transform we forgot our base, The Rural areas, and rest is history. We are here due to our flawed ideas.
Today, rural India is left with the population in agricultural practices and with no major skilled jobs, which prompted youths who are educated in the countryside to migrate to the Urban areas in the need for better employment options. India which is considered mainly an Agrarian Economy, where Agriculture employs more than 50% of India's population and contributes around 18% to its GDP, the potential beyond agriculture of our rural areas is still untapped.
There was once a time in the pre-Colonial era, when Indian handicrafts and potteries were famous worldwide, and we were net exporters from Agriculture to other items of daily use. All that potential got wasted when we were caught into the clutches of Imperialist forces. India which is still the highest producer of Milk worldwide, but not the biggest exporter of Milk and its value added products, which shows the neglect we have been through in all these years towards our potential in the areas where we are truly above others.
Taking the idea from One village One product model, first launched in 1980s in Japan, India can utilise the potential to truly become an Atmanirbhar Bharat, as envisaged by our PM, through harnessing the potential every rural area has and integrating that talent into global value-chain. Unless we make our base strong how can we expect our building to be stronger. Harnessing the potential of Rural India making it on a par with Urban India in terms of Digitalization, Globalization, skill, Infrastructure and basic facilities accessibility, we can achieve what we have been dreaming of all these years.
Engaging with Rural India by no means is an attempt to let the Urban areas and the business class in isolation, but the mere idea this article is trying to reflect is remembering the power which we have been oblivious about all these years to develop our Rural areas and preserve them. The approach to develop and make India what it was in the past only comes when we take every sector into consideration and work hand-in-hand in a decentralized way to fully access the ideal federalism structure in India (What our Bapu, Mahatma Gandhi had always envisioned) by making our gram-panchayats and States, sovereign in a true sense.
This idea not only helps us to be more self-reliant but also weaponises us to fight future Pandemics in a more efficient and democratic way.
Conclusion
A Change starts through a visionary idea, before being a reality.
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