Time For Maximum Welfare

Context: Covid experience shows that privatisation policy needs a complete overhaul.

Criticism of the neo-liberal principle supporting “Minimum government”: The experience of Covid shows that this policy orientation needs a complete overhaul.

• Doesn’t work for the common good:
  • The private sector is driven by only one motive, maximising profits and accumulating capital.
  • While Indians were losing jobs or taking pay cuts, small businesses were shutting down, India Inc was registering record profits.
• Resulted in inequalities and misallocation of resources:
  • Privatisation of health has resulted in inequalities in access to health and caused misallocation of resources.
  • It is easier to get a McDonald’s burger at the food court in a big private hospital than emergency life-saving drugs.
  • As the private sector has grown, the government sector has withdrawn. Instead of building better health facilities for the poor, the government has chosen to spend on medical insurance.
  • Misallocation has resulted from the ditching of planning, yet, that is precisely what we require now – central planning using the latest data collection and analysis techniques.

Way Forward:

• Increasing government spending: The Centre has to spend at least an additional 10 per cent of the GDP.
  • Estimates made by the NIPFP in 2013 suggest that even if all of this is spent on subsidies, salaries and pensions, it will still boost India’s national income by almost that much.
  • If the additional spending is split between capital and revenue expenditure, GDP will go up by 17%.
• Need to identify different categories of beneficiaries and the support they need:
  • The rural poor will need work under MGNREGA-type schemes along with access to free rations.
  • The urban middle class, which is in very bad shape, needs to be supported through vouchers that can be used in any shop to buy goods.
  • Small businesses, hawkers, small retailers, need interest-free loans so that they can finance their working capital cycle; rework the GST system to help revive the unorganised sector
• Resisting corporate profits: Since government spending is derisking their investments, there is no reason for them to expect supernormal profits.
  • Corporate profits can be fixed for one year at a specified multiple of the repo rate.
• Efficient planning and monitoring: All this has to be done using a real-time feedback and tracking system.
  • It requires central planning, monitoring and allocation, but local execution; need to constantly tap into local feedback to tailor custom-made solutions for each district, block, Qasba or village.
  • Involve the use of technologies - New data technologies and AI can target welfare to individual household clusters.