Now to stimulate the stimulus

Context – Government should come up with more bold moves to reform the economy.

Key signals from the recent Stimulus

• Focal point is supply-side support for the survival of the vulnerable.
• Empowering Indians rather than making them dependent.
• Convert crisis into an opportunity by seeking to change the economic architecture and quality of growth through reforms.

Issues with Stimulus

• Demand side: the stimulus package lacks demand side push as India is consumption-based economy. 

• Targeted time-bound tax cuts or incentive can be announced to push the demand.

• Fiscal spending: it is just a fraction of the package. Government’s focus was on off-balance sheet measures such as credit, guarantees and regulatory forbearance to maintain the productivity of MSME, NBFC etc.

Suggestions

• Abolish ECA and other interventionist policies which has been dubbed as anachronistic. 
• Private Sector investment should be promoted in mining, coal, airports, social infrastructure by removing excessive constraints.
• Enhance ease of Doing Business by decriminalising innocuous violations under Companies Act.
• Government should promote next generation reforms at state level and explore the feasibility of incentive-based transfer.
• Intermediaries, regulation should not become constraint impeding the speed and delivery. 

Conclusion

• The announcements of the stimulus package are just the beginning, its effectiveness and results will depend upon how it is actionized.