By Nantoo Banerjee
For almost two years in a row, the country’s economy is faced with an uncertain situation. The Covid-19 pandemic, the Delta variant and the omicron wave are sweeping India as also other parts of the world. The situation brought the worst effect on the country’s job market and general demand-supply position. Millions lost job. New opportunities are rare. Simultaneously, healthcare costs are rising. So are the commodity costs and inflation. They are becoming unbearable to ordinary citizens. Though the general sentiment in India still continues to be positive, the primary challenge before the government and Finance Minister Nirmala Sitaraman is to tackle the twin attack of unemployment and inflation on the people and economy as she prepares to present the annual budget for 2022-23 in Parliament next month. The government must try to restore the public confidence by setting up large state-funded long-term projects that will create millions of new jobs across India. Joblessness and job losses are driving people to frustration. Over five million lost jobs in the previous month, October. The budget should focus more on expenditure on new large government projects, even if they mean higher fiscal deficit and larger borrowing or even new currency note printing. The Keynesian view of deficit financing through printing of currency notes would look highly appropriate under the circumstances. According to Keynes, when money supply is increased in times of depression as both productive capacity and labour stay idle due to deficiency of aggregate demand, price level is not likely to rise much. And, a higher money supply will raise employment, income and output.
The ongoing infrastructure projects need to be speeded up. The government should go for more large capital and employment intensive projects and desist disinvestment in profit making, dividend paying public sector undertakings, which need strong moral support from the state to give their best under the current situation. Inflation rates are uncomfortably high. The Reserve Bank must raise bank rates to control inflation. If the US Federal Reserve can think of interest rate hikes to control inflation, why is RBI latching onto the low interest rate regime despite high wholesale and retail price inflation in India?
Also, it may be time to take stock of the up coming infrastructure projects, which failed to be in full flow mainly due to the fund crunch and pandemic fear. These projects include Sagarmala, Bharatmala, Mumbai Trans Harbour Link, Setu Bharatam, Rashtriya Rajmarg, Inland Waterways and 2,800-km-long Kandla-Gorakhpur LPG Pipeline, the world’s longest. Last September, Prime Minister Narendra Modi asked government departments to prepare a list of infrastructure projects that might have been delayed due to judicial orders. He also asked the departments to account for losses that they incurred to the exchequer by such time overruns. The minutes of the last year’s Pragati (Development) meeting, chaired by the prime minister, clearly mentioned: “Environment and forest, railways and road transport and highways ministries in consultation with law and justice ministry should identify decisions of courts, NGT etc., related to land acquisition, forest or other clearances which are causing delay in infrastructure project. The cabinet secretary should monitor such exercise. A list of delayed projects due to such court decisions including loss incurred to the exchequer may also be prepared.” The routine delays in implementation of official projects had been a major concern of the country’s successive governments. Incidentally, the national perspective plan for the Sagarmala project was released by Prime Minister Modi as early as in April, 2016. It is one of the country’s most ambitious infrastructure development programmes. More than 574 projects at a cost of $82 billion had been identified under the Sagarmala project for implementation.
Also, the government’s 2022-23 budget statement should throw light on the status of the Rs.20-lakh crore package it announced in May 2020 to ease the pandemic distress. It was supposed to revive the economic focus on land, labour, liquidity and laws to benefit farmers, workers, taxpayers, MSMEs and cottage industry. Did it fulfil the desired objectives?
In November 2020, Finance Minister Sitharaman along with Minister of State for Finance and Corporate Affairs Anurag Thakur launched Atmanirbhar Bharat 3.0 to boost Covid-hit economy. A total of 12 announcements were made by the finance minister at a press conference focussing on jobs creation and tax relief in housing. It was stated that India’s self-reliance would be based on five pillars — economy, infrastructure, technology-driven system, vibrant demography and demand. What has been the outcome? Why is India becoming overwhelmingly import dependent on China? Last year, India’s imports from China accounted for $97.5 billion, up by 30 percent from even the pre-pandemic 2019 level? Did anything go wrong with the implementation of Atmanirbhar Bharat programme? Will the 2022-23 budget statement analyse them and take more appropriate steps to help achieve the government’s self-reliance goal? India’s economic future depends substantially on the success of Atmanirbhar Bharat. The large annual trade deficit means a large domestic job loss or unemployment and higher foreign borrowing.
In fact, unemployment appears to be the biggest challenge facing the Indian economy in 2022 and for policy makers. It has reached a near crisis level. The biggest concern for the country’s youth — urban or rural — is of joblessness. The budget for the coming financial year must clearly address this aspect and specify actions to tackle the crisis. Since private sector enterprises are largely starved of fund and shrunken market demand for their products, the initiative has to come from the government.
The UN World Economic Situation and Prospects (WESP) 2022 report suggests that India has to really work hard to improve its economic growth to tackle the problem. India’s GDP is expected to grow at 6.5 percent in fiscal 2022, a contraction from the estimated growth of 8.4 percent in fiscal year 2021, the report pointed out. In fact, the major challenges before the economy are: poverty and unemployment; lack of proper education and healthcare facilities; rising prices of commodities and inflation; and linking economic growth with population increase. The union budget for the coming financial year will be made against the backdrop of these challenges and economic growth uncertainty. Hopefully, the new national budget will tell us how well the Indian economy will navigate these risks. (IPA Service)