Greater fiscal policy support, along with clearance of pending government dues to MSMEs, states, industry and income-tax refunds, advance payment of GST compensation to states, pledging of government’s shares with RBI, issuance of corona-bonds to raise funds, one-time loan restructuring, wage support to urban employers and direct cash transfer to self employed were some of the suggestions put forward on Tuesday by various economists and industry experts for the economy’s revival from the COVID-19 pandemic.
In a dialogue series titled ‘The Rs 21 lakh crore stimulus package – did it pack a punch?’ organised by CII-IEG, Pronab Sen, IGC country director and former Chief Statistician of India, said the RBI has already done the heavy lifting through the monetary policy, now the fiscal policy needs to do the heavy lifting. “Now it’s becoming an increasingly demand constrained situation. We may well move into another supply constraint scenario which would be very difficult to overcome because no amount of liquidity is going to help that. You are going to be looking at the need for fresh investments and that can set us back by three years,” he said, adding that given the level of uncertainty, the focus needs to be on measures to boost demand.
Sen further said the additional government borrowing has taken into account lower revenue collections, and it cannot be treated as a fiscal stimulus.
Naushad Forbes, past president, CII, said the important thing is to see “actual fiscal flows happening soon”. “The most direct way that the government can put money into the economy is if it pays it bills. The government owes something like Rs 3 lakh crore that can be paid … you pay large companies, state governments, small companies, pay your bills. Second, biggest transfers to states are through sharing of GST revenues. We know that in the past states have been paid well behind what they were supposed to be paid. They have been paid after delays of 3 months, 4 months etc, what about paying them in advance. First clear the dues and then pay them in advance so that states have funds available whether to spend for healthcare spending or for anything else,” he said.
Ajit Ranade, chief economist, Aditya Birla Group, said the government could consider pledging its Rs 12 trillion worth shares and borrow from the RBI along with suggesting part monetisation and clearing income tax refunds worth Rs 1-1.5 lakh crore. HDFC Bank’s chief economist Abheek Barua said the joint issuance of corona-bonds by states and the Centre would help in raising resources specifically for the pandemic.
Forbes said employers did not treat workers well and migrant workers returned to their states, but they would return for economic needs in the next few months. “We should put in minimum social contract, if they are moving back for temporary jobs, say, in the construction sector, can we provide a decent level of housing and a minimum insurance scheme,” he said.
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