Suddenly there is a great momentum for the need to revive the economy. After recent criticism by former Finance Minister Yashwant Sinha, of the government’s failure on the economic front, Prime Minister Modi has tried to highlight NDA’s achievements and trash the analysis as totally unfounded. However, Modi’s defence hasn’t been convincing as the RBI’s projection of 6.7 per cent GDP growth in the current fiscal may not be a reality. The ADB forecast of 7 per cent growth in this financial year may also not become a reality.
It is understood that the government plans to spend Rs 50,000 crore ($7.7 billion) to halt the economic slowdown. Though fiscal deficit may increase to 3.7 per of GDP, this is indeed a judicious decision to increase demand creation. As private sector spending is not up to the mark and may not be so in this fiscal, if the public sector is aggressive in setting up projects, demand would steadily go up. But projects have to be well-planned so that these are completed, preferable within a year or so. However, efforts would also have to be made to revive private sector investment and improve the capacity of the banking system to support growth.
The second quarter results may not be much better as floods in some areas and drought in around 220 districts has thrown the agricultural sector into a crisis. But more than productivity increase, the cost of agricultural production has increased considerably, especially in the past 2-3 years, thereby necessitating a revision of MSP. If agricultural labourers migrate to cities in search of employment, as a major section is presently doing, urban chaos would accentuate further.
The most important challenge before the government is lack of job creation and rising unemployment and underemployment. Even the tag ‘jobless growth’ may not be applicable in the present situation as growth has shown a downward trend. Meanwhile, the textile industry, which is a massive job generating sector, is suffering due to distorted GST structure. So is the case with MSMEs, very small traders and businesses. Pesticides, fertilisers, tractors and agricultural equipments, cold storage and warehouse construction are being taxed under GST.
Apart from roads, construction of cold chains in rural areas, it is imperative to prevent wastage of food grains while health and education should be the focus of attention where lot of jobs could be created. Importantly, there is need to discard the top-down approach and accept the bottom-up strategy. This means giving more power to the panchayats by allowing them to identify projects and schemes that benefit the poor and the EWS without imposing them from above. Job creation should primarily be aimed at the rural sector and rural enterprises should be given a boost through technology transfer and re-skilling employees.
Rural welfare schemes need to be boosted with adequate resources. For example, MGNREGA should be provided additional money and the minimum wages, as applicable in different States and as demanded, should be enforced. Besides, to ensure that schemes and projects are properly implemented, strict monitoring is required which is abysmal.
In fact, the present challenge has to be tackled in a manner conducive to Indian conditions –and not what Western influenced experts say – with an emphasis on job creation, infrastructure building and rural revitalisation. Whatever the urban planners or specialists may say, the focus of attention has to be on the majority of the population.