Now to stimulate the stimulus

The Economic Times     21st May 2020     Save    

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.