The Alarm in Those Numbers

Context: The Centre’s reluctance towards fiscal expenditure today seems logical because it wants to conserve resources for a possible future stimulus. 

Need for Immediate Fiscal Relief Measures

• Rising Indebtedness of the Small and Medium Enterprises (SMEs): that have stayed open but have huge unpaid bills and high-interest rate putting pressure on their sustainability.
• The growth potential of the economy will be seriously damaged in future without fiscal stimulus.
• For, E.g. Brazil, which has spent tremendously on relief, is seeing a much lower downgrade to medium-term growth than India.
• The United States, despite spending over 20% of GDP in fiscal and credit relief measures, is still worried about the economic recovery.
• Low Discretionary spending on high-contact services like restaurants, and the associated employment, will stay low until the virus is contained.
• Social Insecurity: Without relief, households skip meals, pull their children out of school and send them to work or beg, pledge their gold to borrow.

The way forward: Resource Mobilization in every possible way - 

• Borrow more without scaring the bond markets if it committed to returning to fiscal viability over the medium term.
•  For e.g., by setting future debt reduction targets through legislation, and committing to honest and transparent fiscal numbers with an independent fiscal council. 
• Prepare public sector firm shares for on-tap sale, to take advantage of every period of market buoyancy.
• Preparations for sale of public and private land will give bond markets greater conviction that the government is serious about restoring fiscal stability.
• Provide relief to the poor:
• MNREGA scheme must be utilized for providing rural relief and should be replenished as needed.
• Ensure more direct cash transfers to the poorest households, especially in urban areas that do not have access to MNREGA, is warranted. 
• The government and public sector firms should clear their payables quickly so that liquidity moves to corporations.
• Small firms below a certain size could be rebated the corporate income and Goods and Services Tax (GST) 
• The government should set aside resources to recapitalize PSBs.
• Incentivize large firms: Cash-rich platforms (like Amazon) could help smaller suppliers get back on their feet, even funding some of them. 
• Construct Financial Structures to help debtors and claimants such as landlords and banks reach agreements to restructure obligations.
• Civil courts, debt recovery tribunals and National Company Law Tribunal should be beefed up to provide rapid backup judgments.
• Increase stimulus in investment in infrastructure construction, which creates jobs and increases the demand for all manner of inputs like cement and steel. 
• Increase exports from India by reversing its recent raising of tariffs so that inputs can be imported at low cost. 
• Improve India’s trade competitiveness by implementing reforms to land acquisition, labour, power and the financial sector.

Conclusion: India needs strong growth, not just to satisfy the aspirations of our youth but to keep our unfriendly neighbours at bay.