New Delhi, May 2: Rakesh Mohan, former Deputy Governor of the Reserve Bank, has suggested a financial package of up to 5 percent of the GDP to cope up with the situation brought about by the Covid-19 pandemic. When an expert like him says so, it has deep meaning and should not be ticked off as just another unworkable suggestion as is the won’t in bureaucracy. All hopes and expectations lie on Prime Minister Narendra Modi who has thus far relied on out-of-the-box suggestions from his faceless advisors.
India, like most other countries, including the developed ones, has to rise to the crisis brought about by the COVID-19 pandemic in the economy. All nations are announcing financial packages according to their capacity to cope up with the situation. India has begun as well, but it has to go far beyond what is being peddled by the finance ministry. As against an expert’s suggestion for providing at least three lakh crore package for the medium, small and micro enterprises (MSMEs), for example, the Government has reportedly announced just one lakh crore. This is grossly inadequate for the sector which gives maximum employment and generates more than half of the country’s GDP.
Experts believe that left to the finance ministry bureaucrats would not be willing to commit a financial package of even two percent of the GDP. This, however, may not be the case now with the PMO oversight across all sectors of the economy. UP Chief Minister Swami Adityanath has recently said that more than 300 foreign firms have evinced interest in setting up units in the state. Surely, industrialized states like Maharashtra, Gujarat, and Tamil Nadu must have received similar interests.
At a time when major countries like the US and Japan have decided to shift manufacturing units from China, such interests shown for India should not be discounted. But much depends upon the creation of infrastructure facilities like assured land, power, communication lines, etc to attract foreign units. FDI is bound to rise in India in these circumstances. For, India offers the biggest market and the cheapest labor.
While there is no dearth of doomsayers among experts and economists, there are a few like Rakesh Mohan who think the country’s economy will bounce back soon if the adequate financial package is given to various sectors. One economist has gone to forecast higher GDP in 2020 because of what he calls several structural reforms carried out in the last five years.
With the implementation of Red, Orange, and Green zones introduced in the country after the present lockdown ends tomorrow (May 3), more than 60 percent economy will be open from next week. Hopefully, the rest will open up gradually in the course of another month. Finances will, however, be the major bottleneck. Fortunately, the Government has announced its backing for the MSMEs, albeit with a package of one lakh crore. It is now for the commercial banks to reciprocate and facilitate easy disbursement.
As expected, the Government should give a big push to the manufacturing sector, making it sure that the MSMEs do not suffer on account of lack of finances. PM Modi has rightly placed agriculture as the Government’s top priority. It is now the turn of the small, medium, and micro-enterprises. Let him commit a sizeable part of the GDP for their push up.