It was not only me who got shocked before four days, hearing the stimulus financial package of 20 lakh crore, pursued by the Prime Minister Narendra Modi. What made me ponder was the way the government has overcome their anxiety over financing a jumbo package in the last 45 days.
And still, I believe that nothing miraculous happened for the last one week for having ultra-confidence in the fiscal position of the nation. But, the explanation, given by finance minister, Nirmala Seetharaman in the last three days clearly explicates that there is no much sign of a stimulus package but boosting the confidence of people. Even though there are some good initiatives, especially in terms of farmer’s protection and tax cuts, it cannot be considered as a realization of the farmer’s struggle during the pandemic.
In reality, the nation has realized that the Gdp can only be increased by agriculture and MSME sector. Great thing! First of all, it is vital to understand what a stimulus package is meant for? It is a Keynesian idea to survive from the recession period through government spending. The prime motive is to increase aggregate demand through employment creation, direct spending and investment. Both monetary policy and fiscal policy can be used to meet this need. If monetary policy does not work, the nation can think about further quantitative easing by borrowing financial assets. In such a realm, how much the stimulus package announced by Nirmala Seetharaman will afford these prime objectives? The tax cut, fund of fund scheme to MSME and direct food distribution to migrant workers will definitely have some positive effects to the economy. Else, what can we count in tandem with direct spending of government or interest cuts in loan payments which are actually the cornerstones of a stimulus package?
Primarily, it feels happy that the nation has started to think positively to explore the opportunities provided by the COVID pandemic in the global scenario. The upliftment of MSME and creating demand through liquidity is, indeed, the best option to enhance a better financial position after COVID. The theory is clean and the question is how, when and where the plan will be executed?Giving confidence in the mind of investors and micro, small and medium entrepreneurs is very important to overcome a recession.
As most of the policies are done via bank loans without having any interest cuts and giving full credit guarantees to banks, it is clear that the prime motive was to boost the confidence of people and banks. But, the aggregate demand will not rise until the consumption side is well addressed. Thus it is vital to have money in the hands of the poor. Without having such government spending, the endeavor to gear the confidence of MSME’s and farmers will not work with an interest-based loan avenue. What actually is in need is an increase in government spending through direct payments to poor and interest-free loans. What actually the government thinks in pooling the cash flows is what I better call as miserliness and serfdom to corporate politics.
A month before, the Research Institute of Economy, Trade and Industry conducted research under the leadership of Hiroyasu Inoue and Yasuyuki Tado on how the lockdown will affect the supply chain of a nation. The study was titled ‘The propagation of the economic impact through supply chain crisis: The case of a megacity lockdown to contain the spread of Covid-19’. It clearly delineates that a nation can’t overcome the supply chain crisis unless it provides possible measures to end the lockdown and fear of the people. Numerically, the count of COVID patients in India is rising in a multiplier effect and the government has not taken any sufficient financial measures to maintain the health of the people, and help them fight against COVID.
Apart from motivating people through Video conferences, what a ruler of the nation has given to those who struggle against COVID. Here, it feels humorous that the so-called duty is fully entrusted in the State government and they have not even given any financial aid to meet their requirements. More sarcastically, the onus of caring for the long walking migrant workers are entrusted in state departments, while the finance minister keeps mum about how the long walking can be stopped. We can’t even think about an economic boost up through MSME’s unless the fear of the people gets lost. Negating their need for basic essentialities, how can a nation be able to think about the future pillars of growth?
What was the motive behind this package? What will be the intention for giving priority to aid Micro, small and medium entrepreneurs? During the last 30 days, economists like Abhijit Banerjee, Raghuram Rajan and Amartya Sen were reiterating in national media about the need of aiding the poor and motivating the MSME. In addition, the interview of opposition leader Rahul Gandhi with Raghuram Rajan added more pressure on the government to have a budget proposal on so-called areas.
Moreover, the realization that the nation cannot move with corporate funding also compelled them to do. It was just before a month the economic advisor of the Prime Minister, Aravind Subramanian wrote that the nation cannot afford a financial package of more than 5 percent of GDP, like what has been done in the other nations, as the country is not in a condition to maintain the inflation and price hikes. Paradoxically, now the package becomes possible(In only numbers).
Despite a proposal of 10 percent GDP of the nation, honestly, we can say that the government is only raising a 3 percentage and the remaining 7 needs to be addressed by the banks and solved by some other exclusion in payments. Sarcastically, the100 percentage credit guarantee to Banks and NBFC is happening in a nation where the government continuously failed in dealing with the bad debts. The 4-year loan with a 10-month moratorium does not seem fair unless the government gets rid of accepting interest even after the period. This will not happen as it cuts the credits to the government.
As the government is seeking so much of pride in accrediting the achievements of Adhar and other Jan Dhan accounts, what if the nation directly transfers the fund to MSME through the so-called accounts. Thus, the way the government is having the proposals with huge amounts is nothing but a smoke screening.While counting the five pillars of growth both the Prime minister and Finance minister failed to note the health of the nation. Economic policy is not only a mere economic boom but also welfare-oriented.
The slogan of Atma Nirbhar(Self-reliance) will not fructify unless the nation ponders about some packages to aid the state governments who are engaged in COVID fighting. The nation can’t surpass the supply chain crisis unless they overcome the lockdown limits. The nation can’t even think about an MSME boom unless they win in providing a fearless platform to work.
In a blindly offered 5 trillion economy, nothing will be going to happen than some dream proclamations and funding boomerangs.