0.1688
900 319 0030
x

Atmanirbhar Bharat Abhiyan - Approach

iasparliament Logo
May 19, 2020

What is the issue?

With the announcement of the final tranche of Atmanirbhar Bharat Abhiyan, a pattern to the government’s approach is visible. Here is an assessment of it.

What is the approach adopted?

  • The measures taken up are largely in line of -
    1. giving a strong supply-side push by boosting availability of capital on easy terms
    2. keeping income and wage support schemes to the minimum
    3. empowering constituencies ranging from farmers and workers to businesses
  • Above all, the government seems to be keen on keeping the damage to the fisc as low as possible.
  • The fiscal impact of the Rs. 20-lakh crore package is estimated by economists at between 2-3% of GDP.
  • This includes withdrawals from provisions already made in the Budget for this fiscal.

What is the idea behind?

  • The pillar on which the package rests is liquidity support so that businesses can be revived.
  • This, in turn, is expected to set the economic cycle back in motion.
  • The option of a demand-side stimulus through a resort to deficit financing seems to be reserved for a future date.
  • This could be in case if the infection does not subside or a second wave begins prompting another lockdown.

What is the concern with this?

  • The problem with this approach is that there is now a desperate need for demand stimulus; the government has focussed on supply-side push.
  • A strategy to drive consumption may have worked better under prevailing conditions.
  • The options could have been suspending GST for a couple of months or at least cutting rates temporarily, combined with a liquidity boost.
  • The Centre’s problem is that its revenues are a fraction of what it would have been in a normal situation.
  • But despite this shortfall, a fiscal stimulus could have been fitted into the overall package.

What are the welcome moves though?

  • The government has done well in increasing the budget for MGNREGA by two-thirds, adding another Rs. 40,000 crore.
  • With migrants now returning to their villages, MGNREGA can be leveraged to keep them occupied with meaningful work.
  • The demand of States for higher borrowings limit has also been granted but with clear reform milestones that they have to meet.
  • The government has also used the opportunity to unleash some much-needed reforms in agriculture marketing.
  • The measures also include -
    1. opening up more sectors for private participation
    2. enhancing foreign direct investment in defence
    3. corporatizing the monolith Ordnance Factory Board, and so on

What lied ahead?

  • In sum, the package has several notable features not all of which are COVID-19 relief.
  • But, the government has clearly refused to borrow and spend more on boosting demand.
  • If the strategy of boosting supply works, it is fine.
  • However, if it does not work on expected lines, the government will be faced with a bigger problem down the line.
  • The strategy of promoting supply without helping boost demand may force a relook later.

 

Source: The Hindu

Login or Register to Post Comments
There are no reviews yet. Be the first one to review.

ARCHIVES

MONTH/YEARWISE ARCHIVES

Free UPSC Interview Guidance Programme